(Houston Business Journal) - As oil and gas companies in the U.S. and Europe rake in huge profits this year, governments are mulling ways to lower costs for consumers — including through windfall profit taxes.
Lawmakers in Europe and the U.K. aim to raise billions of dollars through windfall taxes levied on large energy corporations. The European Union agreed to tax surplus profits from fossil fuel companies earlier this fall, following a similar "Energy Profits Levy" introduced in the U.K. in May.
Oil and gas companies have seen some massive profits even in their latest quarterly financial results: London-based Shell PLC (NYSE: SHEL) announced third-quarter profits of $9.45 billion in earnings last week. Exxon Mobil Corp. (NYSE: XOM), which is moving its headquarters to its Houston-area campus next year, brought in a record profit of $19.66 billion in Q3. California-based Chevron Corp. (NYSE: CVX) made $11.23 billion last quarter.
Shell PLC CEO Ben van Beurden, who is stepping down as chief executive at the end of the year, said energy companies shouldn't be surprised by special levies or other windfall taxes on huge profits being imposed by governments.
"I think we should be prepared for and accept that our industry will be looked at for raising taxes in order to fund the transfers to those that need it most in these very difficult times," van Beurden said in an Oct. 27 call with media.
But despite making billions in profits, Shell said it did not pay the U.K.'s special levy on energy firms because the company was making large investments in its North Sea footprint.
Exxon Mobil Corp. Chairman and CEO Darren Woods is less enthusiastic about the possibility of windfall profit taxes or special levies on U.S. energy companies.
With Americans facing high prices for gasoline, diesel and electricity this year, President Joe Biden has regularly called on oil and gas companies raking in big profits, buying back shares and raising shareholder dividends to lower their costs.
U.S. Secretary of Energy Jennifer Granholm has urged U.S. refiners to focus on rebuilding domestic inventories of fuels like gasoline and diesel, rather than boosting fuel exports. California Gov. Gavin Newsom has called for a windfall tax on oil companies that would go directly back to California taxpayers.
Speaking during a call with analysts Oct. 28, Woods argued that commodity export bans or a windfall profit tax would disadvantage the industry and serve only to solve short-term political problems.
"Those will carry significant long-term negative consequences," Woods said.
In prepared remarks before the company's earnings call, Woods said Exxon's quarterly shareholder dividend — a dividend of 91 cents per share, up 3% from 88 cents last quarter — was an example of the energy industry "returning some of our profits directly to the American people."
"By the end of the year, we will have paid out $15 billion directly to shareholders, about 40% of whom are individual shareholders," Woods said.
Exxon's scale and diversification should be able to position it competitively with whatever policy decisions might be handed down to U.S. oil and gas companies, Woods said.
By Chris Mathews
