Gas prices are going down, but they’re still way too high. While you pay through the nose at the gas pump, Big Oil is lining its pockets.
I’ll get to how to funnel some of these profits back to you in a moment, but first let me explain why and how gas prices got so high.
The major drivers of price increases are pent-up demand after two years of the pandemic, coupled with supply shocks and shortages.
But let’s be clear about another major cause of rising prices: American corporations enjoying their highest profits in 70 years, and using inflation as a cover to push up prices even further.
Recently, the average price of gas gushed to over $5 a gallon across the country — a near record high. It’s now down somewhat, but it’s still way higher than it should be. And this is not just because the cost of crude oil has gone up. It’s because Big Oil’s profit margins have surged above that cost.
The annual U.S. inflation rate was 8.6% in May. Meanwhile, gas prices rose a whopping 47%.
Last year, when Americans were already struggling to pay their heating bills and fill up their gas tanks, the biggest oil companies posted profits totaling $75 billion. This year, Big Oil is on the way to an even bigger bonanza.
In the first quarter of 2022, the five biggest oil companies siphoned off over 200 percent more in profits than the year before. That’s more than $35 billion in profits in just three months. They’re on track to make a record $140 billion this year.
Big Oil could easily absorb the higher costs of crude without raising prices at the pump. But they’re raising prices more than their costs are rising – because they have so much market power. So they’re passing on higher costs to consumers in the form of higher prices and pocketing record profits on top of that.
Lower-income people are bearing the brunt of these higher gas prices. Not only are they less likely to work from home, but they’re more likely to commute longer distances in order to afford housing.
Meanwhile, the profits flow to Big Oil investors and executives. In 2021, oil giants spent over $35 billion on stock buybacks in order to pump up share prices. This year, ExxonMobil alone is planning on buying back $30 billion of its own shares of stock – triple what it had originally planned on.
Make no mistake: this is a direct upward redistribution from consumers like you to Big Oil and its investors.
What can we do about all this? Hit Big Oil with a windfall profits tax.
A windfall tax is aimed at profits that come from taking advantage of a crisis, such as were imposed in World War II.
Britain’s Conservative government just enacted a 25 percent windfall profits tax on oil and gas giants. The revenue from that tax will go to lower-income households to help them weather the energy crisis.
If Britain’s Conservatives can do this, so can the United States. This should be a no-brainer.
There’s currently a bill in Congress to do just this. This windfall profits tax is estimated to recoup $45 billion per year, which would be rebated directly to consumers.
The windfall tax is exactly what we need to stop the gush of money flowing from consumers to Big Oil and its investors.
It’s good policy, good politics, and it’s the right thing to do.
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