President Biden on Monday warned that oil companies would face a “higher tax” on their excess profits if they don’t reinvest in increasing production to bring down prices at the pump.
“They have a responsibility to act in the interest of their consumers, their community and their country, to invest in America by increasing production and refining capacity,” Biden said of the companies during a speech on Monday afternoon.
“If they don’t, they’re going to pay a higher tax on their excess profits and face other restrictions,” he added in the remarks from the White House just more than a week before the midterm elections.
Biden can’t unilaterally impose a tax on companies; he would need a new law to pass Congress. He pledged to work with the legislature to look at his options.
His comments come after ExxonMobil, Chevron and Shell reported high third-quarter earnings. The president name-checked both Exxon and Shell in his speech.
Legislation would face a tough path even in a Congress held by Democrats, since at least 10 GOP votes would now be needed to break a filibuster in the Senate.
Republicans are hoping the midterms will deliver GOP majorities in both chambers.
Gas prices soared earlier this year after Russia’s invasion of Ukraine and Western and U.S. sanctions on Moscow, a major oil producer.
Biden and his allies have blamed Russian President Vladimir Putin for the high prices, and have also tried to pin the blame on the industry.
Analysts have attributed this year’s high gas prices not only to the war, but to a rebound in demand after the pandemic as well as refinery closures and outages.
Gasoline prices averaged about $3.76 per gallon nationally on Monday, down a few cents from a week ago when they were at around $3.79 per gallon.
While that price is still causing pain for numerous consumers, it’s also a significant drop from June highs of $5.02 per gallon.
U.S. oil production has grown after falling with decreased demand during the pandemic.
The Energy Information Administration, an independent government statistics agency, projects that next year, the country will produce an average of 12.4 million barrels per day in 2023, which would beat 2019’s record high production. It projects that this year’s average will be 11.7 million barrels per day.
However, producers have also shown some aversion to what could be a risky investment in new drilling in case fuel prices drop again soon. In recent months, major companies have also sought to return profits to their shareholders by buying back their own stocks.
The oil industry rebuked Biden’s comments on Monday, saying that more taxes would actually discourage production.
“Increasing taxes on American energy discourages investment in new production, which is the exact opposite of what is needed. American families and businesses are looking to lawmakers for solutions, not campaign rhetoric,” said American Petroleum Institute President Mike Sommers in a written statement.
Many progressives, who have long-called for a tax on energy companies’ “windfall” profits, cheered Biden’s comments.
“We’re thrilled to hear President Biden’s support for a Windfall Profits Tax to hold oil and gas companies accountable,” said a statement from Lauren Maunus, advocacy director for Sunrise Movement. “This is what Democrats should have been championing all year.”
This story was updated at 5:33 p.m.