Biden to urge Congress to tax oil companies’ bumper profits

President Joe Biden on Monday will urge Congress to hike taxes on oil and gas companies’ record profits if they don't act to boost oil production, the latest bid by the White House to show it’s trying to bring down prices at the pump and fight inflation.

Biden's move comes just eight days ahead of the midterm election that is expected to see Republicans win control of at least the House and potentially the Senate, and less than a week after major oil companies Exxon Mobil, Chevron and Shell Oil reported quarterly profits totaling about $40 billion.

“The President will again call on oil and gas companies to invest their record profits in lowering costs for American families and increasing production,” a White House official told POLITICO. “And if they don’t, he will call on Congress to consider requiring oil companies to pay tax penalties and face other restrictions.”

Biden is not expected to endorse any specific proposal, which could frustrate Democrats in Congress who’ve proposed legislation months ago to tax the “windfall” profits of large oil and gas companies, only for the administration to hold back on declaring support for the idea. Democratic candidates running in swing states and districts have also deployed the tactic in their campaigns.

“This should have happened a long time ago, but certainly it’s music to my ears,” Rep. Jared Huffman (D-Calif.) told POLITICO in an interview. “The evidence is pouring in for anyone who hadn’t yet figured out that this industry is gouging American consumers.”

But business groups and the oil industry said the latest calls are politically motivated and won't help bring down prices.

“Experience proves that adding new taxes to punish companies actually hurts consumers,” said Neil Bradley, executive vice president and chief policy officer of the U.S. Chamber of Commerce. “In this case, it will raise gasoline prices by removing the incentive to produce and refine more oil. To lower our energy costs we need a long-term energy strategy focused on boosting production, not finger-pointing.”

Biden and Democrats in Congress for months have called for oil and gas companies to invest more capital into expanding production rather than returning profits to shareholders through dividends and share buybacks. But they have found their appeals mostly ignored, and industry executives have been wary of committing to major new production plans given the volatility that has seen crude prices swing by more than $100 in the past three years.

U.S. crude oil futures prices climbed above $120 per barrel in the spring, boosting gasoline to a record high national average of $5.01 per gallon. Those pump prices averaged $3.76 a barrel on Monday, while crude was trading near $85.50 a barrel.

Democrats in the Senate and House, led by Sen. Sheldon Whitehouse of Rhode Island and Rep. Ro Khanna of California, introduced legislation this spring that would tax large oil companies for windfall profits and give the proceeds to consumers as a rebate.

“I’m thrilled to see President Biden publicly consider this approach,” Khanna told POLITICO in a statement Monday. “I’ve had a number of private conversations with White House officials and I hope they will act to help lower prices at the pump and send money back to hardworking Americans.”

Sen. Ron Wyden, chairman of the Finance Committee, introduced a bill this summer applying a 21 percent tax on the “excess" profits of large oil and gas companies with more than $1 billion in annual revenue.

Oil companies have defended their approach, saying their bumper profits are the result of a surge in oil and natural gas prices after Russia’s invasion of Ukraine scrambled global energy markets.

Energy analysts have dismissed Democratic accusations that oil companies are keeping prices high through anti-competitive behavior, noting that previous gasoline price gouging investigations over recent decades have not proved any wrongdoing.

Biden is scheduled to make a public statement Monday afternoon from the White House.