Biden to float tax penalties on oil companies reaping record profits

US president Joe Biden will urge Congress to punish oil companies with higher taxes unless they increase output to bring down prices at the pump, as he steps up attacks on fossil fuel producers in the final stretch of the midterm election campaign.

The country’s biggest oil and gas producers have provoked the ire of the White House over the past week by reporting enormous profits as the fallout from Russia’s invasion of Ukraine helps to drive up prices.

A White House official said Biden would use a speech on Monday to “again call on oil and gas companies to invest their record profits in lowering costs for American families and increasing production”.

“And if they don’t, he will call on Congress to consider requiring oil companies to pay tax penalties and face other restrictions,” the official added.

ExxonMobil, the biggest US oil company, reported a record quarterly profit of almost $20bn on Friday. Rival Chevron posted a profit of $11.2bn, just shy of record earnings the previous quarter.

Biden has repeatedly called on producers to use their bumper profits to pump greater volumes and ease the strain on consumers. But Wall Street has pressed oil companies to return cash to shareholders instead.

US petrol prices hit record levels of more than $5 a gallon this summer. They have since fallen, but remain more than 60 per cent higher than when Biden took office amid robust oil consumption and constraints on global supplies.

High prices at the pump have become a political liability for Democrats ahead of next week’s midterm elections, where the president’s party risks losing control of both chambers of Congress.

“My message to the American energy companies is this: You should not be using your profits to buy back stock or for dividends,” the president said earlier this month. “Not now. Not while a war is raging.”

Any legislation to impose new taxes on the oil industry faces slim odds, especially in the closely divided Senate. Democratic lawmakers previously floated the idea of a windfall tax on oil companies’ profits, an idea that received a cool reception from the oil industry.

Exxon chief executive Darren Woods said on Friday: “There has been discussion in the US about our industry returning some of our profits directly to the American people. In fact, that’s exactly what we’re doing in the form of our quarterly dividend.”

The president responded with a tweet, saying that “giving profits to shareholders is not the same as bringing prices down for American families”.

The administration has taken steps to bring down fuel prices, including record releases from the US Strategic Petroleum Reserve. Biden has said a plan to refill the reserve at a price of $67-$72 a barrel would place a floor under prices and should give oil companies the confidence to drill more.