Exxon Mobil Matt

Exxon Mobil is a 450-billiondollar company specialising in the exploration and production of crude oil and natural gas. The company (based in Texas) is the largest producer of crude oil in the United States. Recently, oil producers worldwide have come under immense scrutiny for the sheer scale of profits made during 2022. Governments have accused these firms of “war profiteering” because of the increase in profits caused by Russia’s invasion of Ukraine. Due to the substantial increase in oil and natural gas prices, Exxon has experienced bumper profits of 20 billion dollars between July and October 2022 which is equal to the total profit generated in all of 2021.

In September 2022, the EU announced an assortment of windfall taxes on energy firms’ extortionate profits in 2022 and 2023. The most prominent tax is actually on the profits of renewable energy producers who have benefited massively from the fivefold increase in electricity prices across the EU. This tax is expected to raise 117 billion dollars by taxing at 100 percent when the wholesale price is above €180 per MWH, which is 60 percent less than the price of electricity at its peak.

In addition, the EU also expects to raise 25 billion dollars by raising the tax rate on oil firms to 33 percent.

In total, the EU can raise 140 billion euros in windfall taxes which can be used to provide subsidies to increase energy efficiency.

In light of this legislation, Exxon Mobil has sued the EU arguing the taxes are “counterproductive” as they decrease investment into renewable energy. In addition, the taxes would increase the strain on European industries and increase reliance on imported energy as investment into the EU is deemed less attractive because of higher risk to reward.

Exxon expects to take a hit of 2 billion dollars on their 2022 profits alone due to these measures.

The new windfall taxes are going to have a significant effect on Europe. On one hand, Brussels has a €140 billion war chest to increase overall energy efficiency and to meet their target of decreasing overall energy consumption by 10 percent. On the other hand, these taxes actively reduce investment in renewable energy and slows down the transition away from fossil fuels which currently supply 55 percent of the EU’s energy. In addition, Exxon has played a vital role in reducing the EU’s dependence on Russia by investing 3 billion dollars in refinery projects in the EU since 2010. I believe that in this current socio-economic political climate the EU cannot afford to make enemies with energy producers particularly when it’s need for new supplies has never been so great. In the future, we can expect energy costs to rise due to the lack of investment in increasing future production capacity.