Governments grabbing at profits
Re: Governments grabbing at profits
As long as the Republicans control the House, I doubt a Windfall Profit Tax will pass. It was a bad idea 1980 to 1986 when Jimmy Carter did it and it will be a bad idea now because taxes on oil producers are passed on to consumers of oil-based products. AND they reduce money for exploration and development of new oil reserves, which is what got us into this mess.
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From the article:
Back in October, President Biden threatened to slap a windfall profits tax on American oil and gas companies if they fail to use their "outrageous" bonanza to expand oil supplies in a bid to lower fuel prices. However, he is yet to follow through on his threat but instead American companies have to face a different beast: buyback tax.
As part of the new Inflation Reduction Act that President Biden signed in August is a new 1% tax on corporate share buybacks. Oil and gas companies will bear the brunt of the new tax because they have dramatically increased buybacks as a favored way to return excess cash to shareholders.
“My message to the American energy companies is this: You should not be using your profits to buy back stock or for dividends. Not now, not while a war is raging,” Biden said in October. Biden has scolded U.S. oil producers saying they fail to appreciate the free-market capitalism windfall made possible by American democracy nor sympathy for their retail customers.
In 2022, U.S. oil company share buybacks increased 1,043%, dwarfing the 64% increase for S&P 500 while dividends were up 33%, more than three times the rise for all the companies in the index. Total free cash flow of the 23 companies in the S&P 500 Energy Index increased 2.3 times to $201 billion, with free cash for Exxon Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) increasing 150% to $60 billion and $36 billion. Meanwhile, Valero Energy Corp.’s (NYSE: VAL) free cash flow grew five-fold to $9 billion from the previous four quarters.
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From the article:
Back in October, President Biden threatened to slap a windfall profits tax on American oil and gas companies if they fail to use their "outrageous" bonanza to expand oil supplies in a bid to lower fuel prices. However, he is yet to follow through on his threat but instead American companies have to face a different beast: buyback tax.
As part of the new Inflation Reduction Act that President Biden signed in August is a new 1% tax on corporate share buybacks. Oil and gas companies will bear the brunt of the new tax because they have dramatically increased buybacks as a favored way to return excess cash to shareholders.
“My message to the American energy companies is this: You should not be using your profits to buy back stock or for dividends. Not now, not while a war is raging,” Biden said in October. Biden has scolded U.S. oil producers saying they fail to appreciate the free-market capitalism windfall made possible by American democracy nor sympathy for their retail customers.
In 2022, U.S. oil company share buybacks increased 1,043%, dwarfing the 64% increase for S&P 500 while dividends were up 33%, more than three times the rise for all the companies in the index. Total free cash flow of the 23 companies in the S&P 500 Energy Index increased 2.3 times to $201 billion, with free cash for Exxon Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) increasing 150% to $60 billion and $36 billion. Meanwhile, Valero Energy Corp.’s (NYSE: VAL) free cash flow grew five-fold to $9 billion from the previous four quarters.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group