Democrats urge windfall tax as big oil set to make billions from Iran war | US politics

As big oil companies stand to reap billions of dollars in profits from the war in Iran, Democratic lawmakers and progressive groups are calling for a windfall tax on major fossil fuel companies.

U.S.-Israeli strikes on Iran have triggered the biggest disruption in fuel supplies ever seen, according to the International Energy Agency, sending crude prices soaring to more than $100 a barrel in recent days. These high prices have hit America’s pocketbook, with the average domestic gas price topping $3.70 a gallon, and Americans spending more than $2 billion extra to fill their tanks over the past fortnight, according to one estimate.

While ordinary people struggle, businesses are making exceptional gains. Since the start of the war last month, the share prices of US oil giants ExxonMobil and Chevron have risen by more than 5% and 7%, respectively, while their stock values ​​have soared.

As oil prices continue to rise, Rhode Island Sen. Sheldon Whitehouse and California Rep. Ro Khanna have proposed taxing big oil companies’ windfall profits from the Iran war-fueled crisis.

“Trump’s war of choice in Iran is not only a moral mistake but an economic mistake that is sending gas prices skyrocketing for American workers,” Khanna said in a statement.

The Guardian has contacted the American Petroleum Institute, the main US oil lobby group, for comment.

Hours before the bill was released, dozens of consumer and environmental organizations sent a formal letter to Congress supporting such a proposal.

“Revenues from a windfall profits tax should go directly to struggling American households to help offset rising costs,” says the letter, which was signed by the Make Polluters Pay campaign, the Sierra Club, Public Citizen and more than 70 other state and national groups.

The time has come to impose this tax, its supporters say. If oil prices remain at their current level, gas prices will continue to rise while U.S. fossil fuel companies could raise an additional $60 billion this year, according to analyzes by consultancy Rystad Energy and investment bank Jeffries.

“Energy producers and commodity trading companies benefit from volatile energy prices,” Isabella Weber, an economics professor at the University of Massachusetts Amherst, told the Guardian last week. Windfall taxes, she said, can “raise funds to protect the most vulnerable sections of society from cost of living pressures.”

Although the United States has not imposed a windfall tax on oil companies since the 1980s, the sector has since benefited from various oil crises. After Russia’s invasion of Ukraine in 2022, oil companies posted historic profits — profits that, according to a 2025 study co-authored by Weber, were 13% greater than the total investment in the United States’ green energy transition that year.

Donald Trump insisted that these excess profits benefited ordinary Americans.

“The United States is by far the largest oil producer in the world, so when oil prices go up, we make a lot of money,” Trump said on Truth Social last week.

This message is only true if by “we” Trump meant to refer to wealthy people, according to another 2025 analysis co-authored by Weber. Profits from oil companies accrue to those who own shares in them, either directly or through retirement funds, pensions or other investments. These people tend to be affluent, according to the study.

In the 2022 oil crisis triggered by Russia’s war against Ukraine, 50% of the profits of U.S. oil and gas companies went to the richest 1% of individuals, while the poorest 50% got only 1% of the profits.

“Because ownership is so heavily skewed toward the richest people in our corporations, record profits for energy companies mean record revenues for them,” Weber said. “The facts clearly show that soaring energy prices are exacerbating inequalities in our societies. »

A windfall tax could help “contain inequality and raise funds to protect the most vulnerable sections of society from cost of living pressures,” Weber said.

In their Tuesday letter to congressional leaders, advocates cited a University of Massachusetts Amherst study indicating that if a similar tax had been passed during the 2022 price shock, about $1,715 could have been returned to every American household.

“Other countries have already demonstrated that this approach works,” the letter said, noting that after the 2022 oil shock, the United Kingdom imposed a windfall tax on oil and gas companies, raising $3.3 billion in the first year and $4.5 billion in the next.

Khanna and Whitehouse previously proposed a windfall profits tax during the 2022 energy crisis. At the time, polling indicated around 80%. Americans supported this decision.

“A windfall profits tax is extremely popular,” said Jamie Henn, director of the anti-oil and gas nonprofit Fossil Free Media, who helped organize support for the current and previous proposals. “The only reason Congress won’t pass it is because too many politicians are bought and paid for by big oil.”

Ultimately, the United States should quickly move toward a managed transition away from “volatile fossil fuels,” said Collin Rees, U.S. policy officer at the climate research and advocacy nonprofit Oil Change International, who signed Tuesday’s letter in support of a windfall tax.

“This could bring enormous potential benefits in terms of reducing conflict and ending the deadly wars for oil that the United States continues to wage,” he said. “In the meantime, we must stop oil billionaires from making profits. »