Biden Threatens Big Oil With 'Higher Tax' on 'Windfall of War' a Week Before Midterms (October 31, 2022)

Eight days before the 2022 midterm elections, President Joe Biden went after Big Oil from the White House. He accused oil companies of “war profiteering” and warned that if they didn’t lower prices at the pump, “they’re going to pay a higher tax on their excess profits and face other restrictions.”

The video above shows the Halloween afternoon statement in the Roosevelt Room on Oct. 31, 2022, which Biden opened with a quip to reporters about the trick-or-treaters outside: “You’re not out in the rain with the Halloweeners.” Treasury Secretary Janet Yellen and Energy Secretary Jennifer Granholm stood by as he spoke [1][4]. Quotes are from the official transcript published by the American Presidency Project [1].

”A Windfall of War”

Biden called it “a very short statement, but a consequential one.” He blamed Russian President Vladimir Putin for the spike in fuel costs, then turned his fire on the oil industry: “The oil industry has not, has not met its commitment to invest in America and support the American people” [1].

He singled out two companies. “Shell announced that it made $9.5 billion in profits for the third quarter,” he said, and “Exxon’s profits for the third quarter were at $18.7 billion” [1]. Exxon’s own report put its third-quarter earnings at $19.7 billion, or $18.7 billion excluding one-time items [3].

“Oil companies’ record profits today are not because they’re doing something new or innovative,” Biden said. “Their profits are a windfall of war—the windfall from the brutal conflict that’s ravaging Ukraine” [1].

The Threat

Then came the warning. “If they don’t, they’re going to pay a higher tax on their excess profits and face other restrictions. My team will work with Congress to look at these options that are available to us and others. It’s time for these companies to stop war profiteering” [1].

Biden insisted he was not anti-business. “Look, I’m a capitalist,” he said. “I have no problem with corporations turning a fair profit” [1]. But he accused the companies of sending their profits to shareholders through stock buybacks “so the executive pay is—are going to skyrocket” [1].

Bloomberg called it “a promise that will be all but impossible to deliver,” noting that Democrats had tried for more than a decade to pass a windfall profits tax and that no such plan was likely to clear a Senate split 50-50 [2]. The AP noted that Biden had been attacking energy profits since at least June, when he said “Exxon made more money than God this year” [4].

The Pushback

The oil industry said the idea would backfire. “The history of a windfall profits tax is clear: reduced domestic production and increased dependence on foreign suppliers,” said Anne Bradbury, head of the American Exploration and Production Council [2].

Even Larry Summers, Treasury secretary under President Bill Clinton, objected. He wrote the next morning: “If you reduce profitability, you will discourage investment which is the opposite of our objective” [5].

Gas Prices: Down From the Peak, Up From Day One

Biden opened his statement by claiming credit for falling prices. “Today, the average price for a gallon of gas is $3.76,” he said, down from more than $5 in June. “That’s adding up to real savings for American families” [1].

The government’s own weekly survey shows both sides of that story [6]:

$2.379: the national average for regular gasoline the week of Jan. 18, 2021, the last reading before Biden took office.
$5.006: the all-time high, set the week of June 13, 2022.
$3.742: the average the day Biden spoke, Oct. 31, 2022, still about $1.36 a gallon higher than when he was sworn in.

By the Numbers

$18.7 billion: Exxon’s third-quarter 2022 earnings excluding one-time items; $19.7 billion including them [3].
$100 billion: what Biden said six of the largest oil companies had made in the previous six months [1].
50 cents: how much lower Biden said gas would be if refiners earned their average 20-year margins and passed the rest to consumers [1].
$3.091: the national average for regular gasoline by Dec. 26, 2022 [6].

What Happened Next

The House flipped. The AP had noted that a new tax on energy producers would be “a tall order” even in a Democratic Congress, and “even less likely” if Republicans retook either chamber [4]. Republicans won a 222-213 House majority in the midterms [7].

Biden changed his pitch. In his State of the Union address on Feb. 7, 2023, he again called Big Oil’s profits “outrageous,” saying the industry made “$200 billion in the midst of a global energy crisis.” But his proposal that night was different: “I propose we quadruple the tax on corporate stock buybacks” [8].

Prices kept falling. By the end of 2022, the national average had dropped to about $3.09 a gallon, according to the Energy Information Administration [6].

In the same appearance, Biden also told reporters his call that day with Brazil’s newly elected president, Luiz Inácio Lula da Silva, “went very well,” and that Lula wanted to focus on “saving the Amazon” [1].

For more of Biden’s closing-week messaging on oil, see his remarks the next day in Miami Gardens, where he said Americans were “going through hell”, and his October claim that the polls would shift “back to our side”.