Stiglitz says oil firms did nothing to deserve windfall profits

Paris – Nobel laureate economist Joseph Stiglitz says the world’s energy giants should pay a special tax on their massive profits. To him, the companies “didn’t do anything to deserve” the windfall.

Oil and gas firms have raked in huge profits this year as energy prices have surged over supply fears after Russia, a major producer of the fossil fuels, invaded Ukraine in late February.

“Sometimes we have this discussion: are profits exploitation or are profits the just deserts of having invested more, putting out more effort,” Stiglitz said in an interview with AFP in Paris.

“This is a particular case where there is no debate,” the 2001 Nobel winner said.

“It is very clear that the oil companies didn’t do anything to deserve the high oil prices. It was (Russian President Vladimir) Putin’s invasion of Ukraine that was at the source of the problem,” Stiglitz said.

The main international oil contract reached almost $140 per barrel in March, though it has since fallen under $100. Gas prices jumped to a record 345 euros per megawatt hours that same month.

US oil giants ExxonMobil and Chevron reported record profits in the second quarter, pulling $17.9 billion and $11.6 billion, respectively.

British oil major Shell enjoyed a fivefold increase in its net profit to $18 billion in the same period.

France’s TotalEnergies and Italy’s Eni have also posted banner earnings. 

“There is an obvious answer. Tax the windfall profits and use some of the revenues to help those suffering,” Stiglitz told AFP at the Paris School of Economics.

– Inflation crisis –

The 79-year-old American economist has championed reforms of international tax rules for years to ensure major corporations pay their fair share.

He is the co-chair of the Independent Commission for the Reform of International Corporate Taxation (ICRICT), an organisation that seeks to put an end to tax havens.

The ICRICT, which held a conference in Paris on Friday, released a report calling for emergency tax measures, “especially on companies profiting from the (inflation) crisis”.

Some countries have taken their own measures.

Spain’s government announced in July temporary taxes on banks and energy firms to cover the cost of state measures to help Spaniards grapple with red-hot inflation.

Britain unveiled in May a temporary windfall tax at a rate of 25 percent on big energy companies that should bring in five billion pounds.

Italy has a similar rate in place.

The European Commission this week announced plans to raise 140 billion euros through a cap on revenues of electricity producers.

While the United States is not dependent on Russian energy like Europe, fuel prices have surged there, too, and oil firms have made huge profits.

“All that is going on is a redistribution from consumers to rich fossil fuel companies,” said Stiglitz, a former chief economist of the World Bank and White House economic adviser during Bill Clinton’s presidency.

– Global tax –

But Stiglitz says energy firms are not the only companies that should face new taxes.

The ICRICT’s report says international firms — “particularly in fuels” but also food, pharmaceuticals and finance — have increased prices “well beyond” their higher costs.

These companies “thereby experienced significantly greater than normal profits”, the report says.

There is “something more going on than just passing on increased costs” to consumers, Stiglitz told AFP.

More than 130 countries have signed an international agreement to impose a 15-percent minimum tax on major corporations.

But implementation of the OECD-brokered deal “still seems far from reality” as it is “stuck in a political impasse both in the US and in the EU”, the ICRICT says.

Last week, Europe’s top five economies, including Germany and France, said they would implement the tax in the face of Hungary’s opposition to an EU-wide agreement.

“I have to say it doesn’t look like it’s going to be adopted, sadly, as weak as it is, as pro-advanced countries as it is, as distorted as it is,” Stiglitz said.