Trending
HERE WE GO AGAIN: President Biden blasted the big oil companies yesterday, suggesting that he could support a windfall profits tax. The industry had staggering profits in the third quarter — but there’s absolutely, positively no chance anytime soon that Congress could pass a new tax on the industry.
THE OIL COMPANIES ARE A CONVENIENT FOIL in an election year, and bashing the industry was back in the limelight yesterday, as Biden called firms “war profiteers” who should return some of their profits to consumers. He specifically cited Chevron and Shell.
BIDEN SAID YESTERDAY THAT OIL COMPANIES should lower their prices instead of buying back their shares or increasing dividends. Stock buy-backs are an increasingly attractive target for activists; a buy-back tax hike was included in infrastructure legislation that passed in the summer.
A WINDFALL PROFITS TAX has won support in some European countries, and has backing from the left in California, where the average price of gasoline is slightly above $6 per gallon. And there’s some support in Congress; Sen. Ron Wyden, the liberal chairman of the Senate Finance Committee, introduced a bill this summer applying a 21% tax on the “excess” profits of large oil and gas companies with more than $1 billion in annual revenue.
WHY THE BILL WILL STALL IN CONGRESS: The math is simple — a windfall profits tax would require a filibuster-proof 60 votes in the Senate, which would be highly unlikely unless it wound up in a reconciliation measure. Even if a windfall tax made it out of the Senate via reconciliation, the House — about to flip to the Republicans in next week’s election — would easily reject it.
IN ADDITION TO VIRTUALLY UNANIMOUS OPPOSITION to a windfall profits tax among Republicans, there’s opposition from Democrats from energy producing states. Sen. Joe Manchin (D-W. Va.) is the leader of that group.
BECAUSE THERE’S A BRICK WALL of opposition to a windfall profits tax in Congress, the Biden Administration will continue to focus on aggressive regulation of pipelines, production, refining, etc. Some oil industry officials say they would prefer to leave oil in the ground until there’s a new climate in Washington, with a president who understands that fossil fuels will be necessary for many years to come.
Related: Grumbling Grows Over Fed Rate Hikes
The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.