Robert Reich (How America Can Lower Gas Prices Like Others …)

How America Can Lower Gas Prices Like Other Countries

Gas prices are falling, but they are still too high. While you pay with your nose at the gas pump, Big Oil is lining its pockets.

I’ll get to how to funnel some of these profits to you shortly, but first let me explain why and how gas prices have gotten so high.

The main drivers of the rise in prices are pent-up demand after two years of the pandemic, along with shocks and supply shortages.

But let’s be clear about another major cause of the price increase: American companies making the highest profits of the last 70 years and using inflation as a hedge to further raise prices.

Recently, the average price of gas has soared to over $ 5 per gallon across the country, a near-record high. It is now slightly down, but it is still much higher than it should be. And this is not only because the cost of crude oil has risen, but also because Big Oil’s profit margins have risen above that cost.

The annual US inflation rate was 8.6% in May, while gas prices rose 47%.

Last year, when Americans were already struggling to pay their heating bills and fill their gas tanks, the major oil companies recorded profits totaling $ 75 billion. This year, Big Oil is well on its way to an even bigger boon.

In the first quarter of 2022, the five largest oil companies stole over 200% more profits than the previous year. That’s more than $ 35 billion in profits in just three months. They are on track to make a record $ 140 billion this year.

Big Oil could easily absorb the higher costs of crude oil without raising the prices at the pump. But they are raising prices more than their costs, because they have so much market power. So they are passing higher costs on to consumers in the form of higher prices and pocketing record profits on top of that.

Low-income people are bearing the brunt of these higher gas prices. Not only are they less likely to work from home, they are also more likely to commute longer distances to afford housing.

Meanwhile, profits flow to Big Oil investors and executives. In 2021, the oil giants spent more than $ 35 billion on share buybacks in order to raise share prices. This year, ExxonMobil alone has plans to repurchase $ 30 billion of its stock, three times what was originally planned.

Make no mistake: this is an upward direct redistribution from consumers like you to Big Oil and its investors.

What can we do about all of this? Hit Big Oil with a Tax on Unexpected Profits.

An unexpected tax is aimed at profits from taking advantage of a crisis, such as the one imposed in World War II.

The British Conservative government has just enacted a 25% tax on unexpected profits on the oil and gas giants. The proceeds from this tax will go to low-income families to help them overcome the energy crisis.

If the British Conservatives can do it, so can the United States. This should be a no-brainer.

There is currently a bill in Congress to do just that. This windfall tax is estimated to fetch $ 45 billion annually, which would be repaid directly to consumers.

The unexpected tax is exactly what we need to stop the flow of money from consumers to Big Oil and its investors.

It’s good politics, good politics, and it’s the right thing to do.