Trump faces calls for windfall tax on big oil’s profits from Iran war
US president’s complaint industry ‘making too much money’ comes after his policies boosted corporations
guardian.org, Dharna Noor, Fri, August 7, 2026 05.00 EDTDonald Trump’s statement that oil companies have made “too much money” from the Iran war has angered environmentalists, who say that his policies were designed to benefit those very corporations. If he really believes his own claims, he should impose a windfall profits tax, advocates say.
Federal taxes serve two purposes, neither of which is to give spending money to a government that can create unlimited amounts of it:
- To control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government wishes to reward, and
- To assure demand for the U.S. dollar by requiring that taxes be paid in dollars.
A “windfall profits” tax would fall under purpose #1, to discourage “excessive” profits. The problems are:
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- What is “excessive?”
- What is the industry doing with the money?
- Federal taxes remove dollars from the economy, thus reducing economic growth.
What is “excessive”? There is no objective economic definition. Should “excessive” mean:
- profits above the company’s historical average?
- profits above a fixed percentage return on capital?
- profits above those of other industries?
- profits attributable to external events rather than investment or innovation?
The federal government should tax only what it wants to discourage, and it should fund what it wants to encourage. It never should tax to obtain funds. It already has infinite funds for spending.
Every definition is somewhat arbitrary. A company that invested billions in exploration years before a supply shock might earn huge profits during that shock. Are those “windfall” profits or simply the reward for taking long-term risks?
What is the industry doing with the money? The macroeconomic consequences depend greatly on where the profits go. If the companies:
- invest in drilling, pipelines, refineries, or new technologies, those dollars continue circulating through the economy and increase productive capacity;
- pay dividends, much goes to shareholders, pension funds, and retirement accounts, who may spend or reinvest it;
- buy back stock, the effect is more complicated—it raises shareholders’ wealth but doesn’t directly create new productive assets.
So, the economic impact differs depending on the use of the profits.
Federal taxes remove dollars from the economy. Taxes reduce private-sector disposable income and therefore tend to reduce aggregate demand, all else equal. Thus, taxes are recessive.
Since the federal government creates dollars when it spends and deletes dollars when it taxes, federal taxation is viewed primarily as a mechanism for influencing economic behavior rather than financing spending. A windfall profits tax is a policy tool, that slows economic growth
Inflation is caused by oil shortages or reduced refining capacity. Taxing oil company profits after the fact does not increase the supply of oil. The tax may reduce private spending slightly, but it does not create another barrel of crude or another gallon of gasoline.
Because inflation is caused mainly by shortages, and the federal government does not need oil-company tax revenue in order to spend—then I would not impose a windfall-profits tax merely because the profits look obscene.
I would ask a narrower question: What action will increase the supply of energy, or reduce the economy’s dependence on the scarce thing.
First, I would leave the profits alone unless there is evidence of actual anti-competitive conduct, fraud, collusion, or deliberate withholding of supply. High profits during a shortage are partly the market’s signal saying, “Produce more of this.” Taxing away that signal can be self-defeating. And the present U.S. situation is revealing: crude-oil production actually reached a record 13.6 million barrels per day in 2025, despite fewer rigs, largely because productivity increased. So the issue is not simply “oil companies refuse to drill.”
Second, I would identify the actual bottleneck. Crude oil is only one part of the gasoline price. Refining, pipelines, ports, storage, specialized regional fuel requirements, shipping, and geopolitical supply all matter. In fact, U.S. refining capacity fell by more than 250,000 barrels per day during 2025, and several refinery closures have particularly large regional effects where replacement fuel cannot easily be piped in. That’s exactly the kind of shortage I would attack.
Find the shortage and subsidize its elimination. If the bottleneck is refining capacity, subsidize refinery expansion or modernization. If it is pipelines, build pipelines. If it is electricity transmission, build transmission. If it is drilling equipment or geological exploration, subsidize those.
The objective is not “support the oil industry.” It is it to increase the supply of whatever is scarce. Make the subsidy conditional on production, not profits.
I wouldn’t say, “Exxon, please invest your windfall wisely.” I’d say, in effect: Produce an additional X barrels, gallons, megawatts, or units of capacity, and the federal government will pay you Y. That converts federal money creation directly into an incentive to cure the shortage.
Attack monopoly behavior separately. If companies actually conspire to restrict production or manipulate prices, that’s an antitrust problem. Prosecute it as such. Don’t use a vaguely defined “excess profits” tax as a substitute for proving wrongdoing.
Spend heavily on substitutes. Not because the government needs the oil companies’ money, but because every additional substitute reduces pressure on the scarce commodity. Nuclear, solar, wind, geothermal, batteries, transmission, public transportation, more efficient vehicles—whatever can economically displace petroleum consumption.
The criterion should be additional real resources, not whether somebody can invent a tax to “pay for” them.
Congress and the President have two choices.
A. Tax away the $100 billion.
Private-sector financial assets fall $100 billion. No additional oil necessarily appears.
B. Leave the $100 billion alone and spend another $100 billion specifically to increase energy supply.
Now you potentially get more drilling, refining, transmission, alternatives, or efficiency.
B makes considerably more sense. The government doesn’t need to obtain the first $100 billion before it can spend the second $100 billion.
“Trump’s declaration that big oil is ‘making too much money’ belies his accommodation and giveaways to the industry that have enabled its price-gouging – not to mention his disaster of a war of choice against Iran,” said Tyson Slocum, energy program director at the consumer advocacy non-profit Public Citizen.
“But like a broken clock that’s correct twice a day, the president is right that oil companies are ‘making too much money’, which means Trump should endorse a windfall profits tax.”
ExxonMobil and Chevron on Friday both reported windfall profits for the second quarter of the year. Chevron said its earnings soared nearly 400% to $12bn, while Exxon’s profits more than doubled to $14.5bn. On Monday evening, Trump took aim at those gains, saying the companies “ought to give some of that back to the public”.
“Giving back to the public” is not the same as giving tax money to the government.
“They’re making too much money based on a shortage,” he told reporters at the White House. “I don’t like it.”
Not long ago, however, Trump was celebrating the fact that the war on Iran, which he launched with Israel in February, has pushed up gas prices. “When oil prices go up, we make a lot of money,” he said on social media in March.
By “we,” Trump means he and his sons, who invest in oil companies.
Earlier that month, Trump claimed that Iran’s shutdown of the major shipping route the strait of Hormuz “doesn’t really affect” the US the way it does “other countries” because it is the top global crude producer, and because just a small portion of the country’s oil imports comes from the Persian Gulf.
But oil prices are influenced by global markets and supply chains, experts have noted.
Trump has also relentlessly boosted oil and gas interests while in office. In 2024, he reportedly met with more than 20 oil bosses, seeking $1bn in campaign donationsfrom their industry and promising if elected to remove dozens of environmental regulations.
While he did not manage to get to that $1bn figure, he did obtain record contributions from the sector. Since re-entering the White House last year, he has eased dozens of restrictions and regulations on fossil fuel expansion, exempted fossil fuel producers from environmental rules, and signed an executive order last year directing the attorney general to prioritize blocking climate lawsuits targeting oil majors.
“We shouldn’t be surprised that the same companies that struck a $1bn quid pro quo to help elect Trump in exchange for delivering on their policy wish list are now cashing in on his anti-consumer agenda,” said Lena Moffitt, executive director of climate advocacy group Evergreen Action.
Trump has also personally invested in major oil companies. According to his 2025 financial disclosure, he increased his personal energy portfolio last year, placing between $3m and $12m in ExxonMobil stock and between $1.25m and $6m in Chevron stock,
Politico first reported, indicating he may be benefiting from the two companies’ windfall profits.
As oil companies have reaped billions from the Iran war’s impact on fossil fuel prices, the Rhode Island senator Sheldon Whitehouse and California congressman Ro Khanna have proposed taxing big oil’s windfall profits from the Iran war-fueled crisis, saying proceeds from that tax should go to American families who are paying more for fuel.
Again, taxes do not “go to American families.” Taxing oil would increase the price and take money from American families. The government does not spend tax dollars on benefits to American families. It creates new dollars for that purpose.
Tax the behavior you want less of; subsidize the behavior you want more of. That, not funding spending, is the purpose of federal taxes.
If oil companies are producing oil that the country desperately needs, taxing them because they succeeded in selling a scarce product at high prices is a rather peculiar incentive system. If they’re deliberately restricting needed supply, tax that behavior. If they’re expanding scarce supply, reward it.
That, I think, is more economically coherent than “They’re making too much money—take some away.”
IN SUMMARY
Do not tax profits. Fund and give tax breaks to support research and production of alternative fuels (solar, wind, water, tidal, geothermal, and nuclear.) Also support energy storage research and production: (batteries, pumped hydro storage, compressed-air storage, and hydrogen.)
In other words, cure the shortage; don’t penalize the supplier.
Rodger Malcolm Mitchell
#Monetary Sovereignty - Mitchell 