Oil Companies Windfall Gains To Be Taxed at 50% To Fund Stimulus Checks

The crisis seems to have no end; starting with the COVID19 pandemic to the Russia-Ukraine war, the individuals faced the worst impact. Adding to the adversity is the high rate of inflation that is making it difficult for all even to meet their daily and basic needs. While citizens of the USA are waiting for a fourth stimulus check, it shared a recently positive piece of positive news that sparked hope.

Oil Companies Windfall Gains To Be Taxed at 50 To Fund Stimulus Checks

Large oil companies’ windfall profits would be taxed at a 50% rate under a bill introduced by legislators on Thursday. Consumers earning less than $75k per year would receive direct payments from the tax proceeds. The bill may present both challenges and opportunities for the energy value chain in its current form.

Companies that will pay this tax

While this news is great for the citizens, companies will face a slash in their profitability soon. There is one basic condition that the government defines for taxation.

Companies that produce or import more than 300kb/d would be taxed. The 50% rate applies to barrels produced or imported into the United States. The windfall tax, computed as the difference between the average Brent oil price from 2015 to 2019 and the current price, is a “top line” tax.

Few companies noted for taxation

The government has started listing down the names of the companies for ion. The tax would hurt big integrated companies like Exxon Chevron and most large-cap shale companies like Pioneer, Devon, Marathon, and ConocoPhillips, as reported by Seeking Alpha.

Expected impact of the proposal

The US imports around 6 million barrels per day of predominantly heavy oil for diesel and jet fuel manufacturing while exporting extra light oil grades from the shale sector. Refineries profit from the small price differential between gasoline and crude oil products.

Smaller assets would become less valuable if merged into a bigger business, potentially reversing the industry’s tendency toward consolidation. The law aims to give $120 in annual stimulus to consumers.

The consequence that can be faced

If a windfall tax inhibits the industry’s motivation to spend, consumers worldwide may endure the brunt of high oil prices for a long time.

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