Following Russia’s invasion of Ukraine, photos of gas station billboards advertising prices up to $5.57 per gallon in California have shocked and stressed consumers. These record-setting prices, averaging $4.24 per gallon, are estimated to add $2,000 more in gasoline costs to the typical household budget this year. For everyday people who need to fill up to get to work, get their kids to school, or go to the doctor, these prices are a blow to carefully planned budgets, and disproportionately disrupt the lives of the more than 64 percent of Americans who live paycheck to paycheck. In a country that lacks a robust and efficient system of public transportation, these painful gas prices constitute a major crisis.
The prevailing narrative surrounding the cause of these skyrocketing prices is the Russian invasion of Ukraine and the United States’ subsequent response. Earlier this month, President Joe Biden instituted a ban on Russian oil and gas imports as a response to Russia’s aggression in Eastern Europe, sparking a 20 percent spike in oil prices. Against the existing backdrop of economic trouble caused by the COVID-19 pandemic and inflation, it is easy for regular consumers to feel like these prices are just a natural result of the current state of affairs.
The spike in oil and gas prices is being sold to Americans as a necessary sacrifice in the attempts by the U.S. to punish Russia, and this story is working. In a recent poll by Quinnipiac University, a vast majority of Americans from both parties support banning imports of Russian oil and gas, no matter what the price consequences may be at the pump. This patriotic attitude toward accepting sky-high prices in exchange for “defeating Putin” is misguided.
Oil and gas companies in the U.S. are taking advantage of the tense energy situation of the moment to push toward higher profits at the expense of working people, when they could instead be acting to bring down these costs. Oil giants like ExxonMobil are expected to make up to $10 billion more in profit in 2022 than in 2021, not due to any special effort on their part, but because of artificially high prices. Beyond simply raking in the extra profit they are gaining from the sanctions on Russian oil and gas, these companies are capitalizing on the conflict in Ukraine to mobilize massive expansions in their business. The newfound fervor in support of domestic oil production is proving lucrative for oil companies. In the last week of February there were 650 operational oil and gas rigs in the U.S. and some have begun to make the “patriotic” case for increasing fracking, including on federal lands, as a “powerful weapon against Russia.” There is nothing patriotic about destroying American land and the health of the planet.
Despite this opportunity to expand their business operations, oil companies have not even produced more oil to alleviate the rise in prices—they are instead using these newfound profits to buy back their own stocks, putting extra dollars in the pockets of their executives at the expense of ordinary people who are needlessly paying thousands more on gas this year. The math shows that these big corporations could easily afford to absorb, or at least offset, the staggering price increases that we are seeing at the moment, but they are simply choosing not to.
Congress should ensure that oil giants are not impeding the ability of people to get to work or heat their homes, and to do so, it should institute a windfall profits tax on the corporations that are benefiting from the combination of pandemic recovery, inflation, and sanctions on Russia. Some progressive members of Congress, including Senators Bernie Sanders and Elizabeth Warren and Congressman Ro Khanna, introduced the Big Oil Windfall Profits Tax to institute a tax on the difference between current and pre-pandemic gas prices. This bill would not only serve to dissuade big oil companies from jacking prices up to above pre-pandemic levels, but it would also raise revenue that could be redistributed to low- and middle-income taxpayers who are struggling to pay the current prices. The bill is estimated to raise enough revenue to provide each individual with a rebate of about $240 a year.
Even with all of the uncertainty and turmoil the world is facing in 2022, including the lasting effects of the pandemic on the economy and Russia’s invasion of Ukraine, big oil companies are bringing in record profits while ordinary people struggle to stay afloat. Instituting a progressive windfall tax to discourage price gouging and distributing the revenue to those hit hardest by the high prices makes sense—companies that are choosing to artificially inflate the price of an essential good should face consequences, and working people deserve relief.
Featured Graphic by Liz Schwab/ Heights Editor