Counterproductive. That is how ExxonMobil describes windfall taxes. And it is sticking to this position, so much so that it filed a lawsuit against the European Union (EU) back in December to challenge its introduction.
The EU windfall tax allows the bloc to place a 33% levy on energy company profits for 2022.
Exxon raked in US$55.7 billion for the full year. Other major oil companies like Shell and BP recorded similar profits. Exxon spokesperson Casey Norton had told Reuters on Dec. 29 that the windfall tax would end up being “a destructive force for investor confidence.”
Exxon’s Chief Executive Officer (CEO) Darren Woods echoed similar comments during the company’s recent Q4 2022 Earning Conference. Woods explained that windfall taxes will dim the industry’s appetite to pump more investments, especially “in a challenging market” like Europe, which is becoming “more uncertain and less stable.”
“…you are going to then see that begin to propagate around the world just because of the negative impact [windfall taxes] have on an industry that requires a stable policy,” he highlighted. “My sense is that there will be a lot of unintended negative consequences that come from this.”
And Woods added, as that manifests itself, there will be a lot less appetite for investments.
Windfall taxes have been introduced in some nations as a knee-jerk reaction to the global energy crisis to help ease the pockets of consumers paying the highest prices in decades for electricity, gasoline, and travel. Countries such as Canada and the United Kingdom have also gone this route.
Norway-based Rystad Energy believes this approach would only hurt the oil industry in the end. Before such steps are taken, Rystad Energy said the situation must be analysed as “rationally as possible”.
Over in Guyana, the government has made its position clear; a windfall tax cannot be implemented given the stability clause of the contract governing Stabroek Block operations.
