Oil Industry and Windfall Profits

Over the past 10 years, surging crude oil and petroleum product prices have increased oil and gas industry revenues and generated record profits, particularly for the top five major integrated companies (also known as the "super-majors"): Exxon-Mobil, Royal Dutch Shell, BP, Chevron, and Conoco/Phillips. These companies, which reported a predominant share of those profits, generated more than $100 billion in profits on nearly $1.5 trillion of revenues in 2007. From 2003 to 2007, revenues increased by 51%; net income (profits) increased by 85%. Being largely price-driven, with no increase in output, and with little new production resulting from increased oil industry investment, many believe that a portion of the increased oil industry income over this period represents a windfall and unearned gain, i.e., income not earned by any additional effort on the part of the firms, but due primarily to record crude oil prices, which are set in the world oil marketplace. Numerous bills have been introduced in the Congress over this period to impose a windfall profits tax (WPT) on oil. This book discusses these options.