(Nov 5) : The oil industry is bracing for Democrats to use their newfound political muscle to push for a deal with President Donald Trump and impose a windfall tax on surging crude prices.

Democrats already have proposed legislation to make companies compensate consumers for high fuel prices. Now oil industry executives — and their lobbyists in Washington — are concerned the tax could emerge as part of a broader agreement between Democrats and Trump following an election that hinged on voters’ anger over high prices, according to people familiar with the matter.

“It’s a legitimate concern,” said Mike McKenna, a Republican strategist who advised Trump on energy issues during his first term.

The people asked not to be named because they weren’t authorized to speak publicly about the matter.

Trump hasn’t called explicitly for a windfall tax, and a White House official said the idea of the president cooperating with Democrats on one hasn’t been discussed, calling it “baseless speculation.” The president even celebrated oil profits as an economic benefit for the US during a recent campaign rally, saying companies are “making hundreds of billions of dollars because of what’s happened in the Middle East.”

Still, Trump has also shown a willingness to lash out at oil giants. For instance, he called on the Justice Department to investigate them for price gouging in June. He also criticized ExxonMobil Holdings Corp. and Chevron Corp. in August for “making too much money” after they reported second-quarter profits that totaled about US$26 billion.

“I don’t like it,” Trump said at the time. He urged the companies to “give some of that back to the public.” 

Rapidan Energy Group, a Washington-based research and consulting firm, said Wednesday there’s a 30% chance Democrats will pass an oil windfall tax or cut fossil-fuel tax breaks after taking control of Congress. The move could help pay for a bipartisan health care package, Rapidan said.

The legislation introduced in March by Senator Sheldon Whitehouse of Rhode Island and Representative Ro Khanna of California would impose a quarterly tax on oil companies when Brent crude exceeds its average price in 2025, which was about $68 a barrel. The proceeds would fund rebate checks to compensate consumers. 

Representative Jared Huffman, a California Democrat who co-sponsored the House version of the bill, said it will be a priority when his party takes control of Congress next year.

“I’ll certainly push for that,” said Huffman, who is poised to lead the House Natural Resources Committee.

Whitehouse and Khanna didn’t immediately respond to requests for comment. 

ClearView Energy Partners analyst Kevin Book downplayed the risk of Democrats striking a profit-tax deal with Trump. 

“Yes, a president in legacy mode might strike a deal with the opposition,” Book said in an email. “But given the president’s recent celebration of industry profitability, windfall profits taxes seem unlikely to be at the top of his list.” 

The US imposed a windfall tax on domestically produced oil in 1980 under President Jimmy Carter, and it remained in effect for about eight years. The American Petroleum Institute said the effort raised less money than projected and led to lower domestic oil production. 

“You can’t tax your way to greater energy security,” American Petroleum Institute spokeswoman Andrea Woods said. “Windfall profits taxes don’t lower prices for consumers — they discourage the long-term investment needed to strengthen supply, infrastructure and a more resilient energy system.” 

Environmentalists, meanwhile, are calling on Democrats to push ahead with the idea.

“Congress must pass a windfall profits tax to stop the massive transfer of wealth and ensure the extraordinary profits generated off the backs of working families during the Iran war are returned to the public,” said Lorne Stockman, research director at Oil Change International. 

uploaded by Isabelle Francis