Pain at the pump, will Albany react?
By now we are all feeling the rising costs of energy. Gas is heading toward $5 per gallon, home heating costs have risen, with some using oil having their prices jump to nearly $6 per gallon. Utility bills have soared. President Biden argues that these hikes are a “Putin tax” – referring to Russian “mob boss” Vladimir Putin’s unprovoked aggression in Ukraine. And while there is a lot of truth to the President’s description, it doesn’t answer one question: Who benefits from this “tax”?
When we pay taxes, we know where it goes. Federal, state, and local governments charge taxes for the delivery of public services. Taxes are the cost of paying for civilization. But when it comes to the “Putin tax” that we pay at the pump, who gets it? Clearly, it’s not the Russian leader, the US has blocked oil and gas imports from Russia. No, those “taxes” are going to oil companies, who are seeing a surge in their already fat profits.
With oil prices pushing toward $130 a barrel last week — a stunning increase from a low of $18 a barrel just two years ago — oil and gas companies have hit the jackpot.
Exxon Mobil made $23 billion in profit for 2021. Chevron had its most profitable year since 2014, reporting that it made $15.6 billion in revenue for 2021. BP reported it made $12.85 billion in 2021, with $4.1 billion being made in the fourth financial quarter, the company’s largest quarterly profit since 2013. Shell earned $19.29 billion for the year, up from $4.85 billion in 2020 with $6.4 billion in profits in the last financial quarter of 2021, its largest since 2014.
The Ukrainian invasion is likely to swell those profits even further as energy supplies get squeezed by global sanctions on Russia.
The “Putin tax” really means Americans are forking over even more money to oil companies to fatten their profits. And let’s not forget that the reason that the world still relies heavily on fossil fuels – and the revenues that are Putin’s source of military strength – is because the oil companies have fought tooth-and-nail to block efforts to shift the world toward renewable energy sources, including decades of lying about the dangers of global warming. Beyond their profiteering from global crises, their actions on climate are among the worst in the history of the world.
So shouldn’t some of those profits be diverted to pay for pressing needs, including the costs of dealing with climate change?
At the national level, members of Congress have introduced legislation to enact a “windfall profits tax.” The bill would levy a 50 percent tax on the profits oil companies earn above the price of $66 per barrel, which was the average oil price from 2015 through 2019. The legislation then sends half the tax collections back to consumers in the form of a rebate, which the sponsors say would amount to a $240 payout to single tax filers and $360 for joint filers next year, if the price for oil remains at $120 per barrel.
Of course, the legislation would need to ensure that safeguards exist so that the oil companies simply don’t pass on the cost of the tax to consumers – thus undermining the benefits of the tax. That’s always the problem – how to enact a tax to claw back unfair profits in a manner that makes it extremely difficult – if not impossible – to pass along the tax costs to the already-overburdened consumer.
Here in New York, there is a growing call for energy tax relief for consumers. Depending on where you live – sales taxes differ by county – the combination of New York State and local taxes consumers pay when they buy gas can be as high as nearly 50 cents per gallon. Expect some sort of relief from state gas taxes this session.
There is another approach – one that diverts oil industry profits and does so in a way that protects consumers. Policymakers have been mulling a “Make Polluters Pay” program that would assess the largest oil companies for their contribution to greenhouse gas emissions over the past two decades, with the companies paying for their proportional share of the harm they caused. By requiring only the largest companies to pay, market competition from their smaller competitors would keep prices low, thus making it impossible for Big Oil to pass along the costs of the assessment. That type of approach seems like the best way to divert excess profits and to fund the costs of climate change.
As policymakers sort this out, there are things that consumers can do now to help offset the skyrocketing costs of energy.
In the short-term, drive less, keep homes a bit cooler, and conserve more. In the medium term, see about renewable energy options. Solar power and geothermal power, if appropriate, can reduce reliance on fossil fuels. Adding insulation to your home can reduce the need for expensive heating too.
In the longer term, push lawmakers to make renewable power the clear option for the future. Petrodollars tend to fund many of the world’s worst actors. As long as the nation relies on oil, they literally have the world over a barrel. Kicking the fossil fuel habit will deprive Big Oil of profits and help mitigate global climate change. And, of course, let’s make the climate polluters pay.
Blair Horner is executive director of the New York Public Interest Research Group.
The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.