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Amid calls from the Biden administration to the U.S. oil industry to increase production, a Democratic senator has come up with a plan to increase the tax burden on the industry.
Ron Wyden, chair of the Senate Finance Committee, proposed a surtax of 21 percent for oil companies with a profit margin of 10 percent or more. This would bring their total tax burden to 42 percent, Bloomberg reported, citing two unnamed sources familiar with the proposal, which has yet to be released to the public.
The profits that U.S. oil companies have been making on the back of consistently higher oil prices have made a good target for Democratic lawmakers, sparking accusations of price gouging in order to fatten profits and refusing to drill in order to keep these profits as fat as they are.
The latest to do so was President Biden himself, who berated the oil industry for benefiting from higher oil prices, accusing it of taking advantage of the oil supply shortage to fill its pockets. "Exxon made more money than God this year," Biden said in a speech last week, calling on the company to "start investing and start paying your taxes."
"Why aren't they drilling? Because they make more money not producing more oil," Biden also said.
Exxon responded to the accusations saying it was, in fact, increasing oil production with a 50-percent increase in investments in shale oil, expecting a 25-percent increase in output, a spokesman for the supermajor told Reuters.
This, however, will not be enough to close the gap between supply and demand, which has pushed U.S. retail gasoline prices to an all-time high, with inflation at the highest in four decades.
Senator Wyden, according to the Bloomberg sources, hopes to get all 50 Democrats in the Senate on his side so he can pass his surtax proposal without the need for Republican support.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.