White House weighs oil profits tax to fund consumer rebate

[June 03, 2022]  By Trevor Hunnicutt

WASHINGTON (Reuters) -The White House is considering congressional proposals that could tax oil and gas producers' profits in order to provide a benefit to consumers struggling with higher energy prices, a U.S. official said on Thursday.

"There are a variety of interesting proposals and design choices on a windfall profits tax," Bharat Ramamurti, the deputy director of President Joe Biden's National Economic Council, said during a panel discussion sponsored by the Roosevelt Institute think tank.

"We've looked carefully at each of them and are engaging in conversations with Congress about design."

High energy prices have led to record profits for large oil producers this year. Exxon Mobil Corp, the largest U.S. oil producer, doubled its first-quarter profit to $5.48 billion and said it would triple its stock buybacks through 2023 to $30 billion.

The Biden administration has criticized producers for sitting on profits and not investing in further production to lower costs.

Britain last week announced a 25% windfall tax on oil and gas producers' profits, alongside a 15 billion pound ($18.9 billion) package of support for households.

"One thing you want to be aware of when you are looking at those types of proposals is how is it going to affect supply as well," Ramamurti said. "I don't think that's an insurmountable hurdle, but it is an important question at a time when there's clearly a supply issue."

Shares of Exxon and peer Chevron Corp fell less than 1% in trading on the New York Stock Exchange on Thursday.

One proposal backed by 15 Democratic-aligned senators and several members in the House of Representatives would place levies on large oil companies quarterly for crude produced domestically or imported.

Gas prices over the $8.00 mark are advertised at a Chevron Station in Los Angeles, California, U.S., May 30, 2022. REUTERS/Lucy Nicholson/File Photo

Consumers would then be paid a tax rebate that could amount to a few hundred dollars per year, but the Democrats' bill faces uncertain prospects in Congress.

"I don't think it will happen in the U.S., mainly just the way the Senate's divided," John Hess, chief executive of oil producer Hess Corp, said at an industry conference on Thursday. "I don't think (swing vote Senator) Joe Manchin would vote for it."

Biden has come under pressure to ease the gasoline price shock ahead of November's midterm elections with his Democratic Party's control of Congress on the line.

The U.S. economy had its strongest growth in nearly four decades in 2021, after the government poured trillions of dollars in COVID-19 relief into the economy, and the Federal Reserve kept borrowing costs near zero.

The rescue efforts helped drive unemployment down to 3.6% from its pandemic-era high of 15%, but also revved up consumer spending that has contributed, along with the war in Ukraine, to higher prices.

Prices were up 8.3% in April from the year prior, according to the Labor Department, but the rate of growth slowed as gasoline prices eased off record highs. That trend suggested that inflation may have peaked.

(Reporting by Trevor Hunnicutt; Additional reporting by Sabrina Valle; Editing by Bill Berkrot and Jonathan Oatis)

[© 2022 Thomson Reuters. All rights reserved.]
This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.