Here we go again.
With gas prices elevated amid ongoing uncertainty in the Middle East, Sen. Sheldon Whitehouse, along with Reps. Ro Khanna and Brad Sherman, are reviving one of Washington’s worst recycled ideas: a windfall profits tax on oil and gas companies. The pitch is always the same: blame “Big Oil” for high prices, slap producers with a new tax, promise to send the money back to consumers, and declare victory.
Connecticut Sen. Richard Blumenthal and several of his colleagues recently made the same argument, maintaining that a proposed federal gas tax suspension should be paired with a “big oil windfall profits tax,” citing oil-company profits tied to the Iran war.
The problem is, as we have documented repeatedly on Energy in Depth, is that none of this would lower gas prices. In fact, the evidence suggests it would do the opposite.
As Energy Secretary Chris Wright told Sen. Blumenthal during a Senate hearing recently, “if you tax something, you get less of it.” That is basic economics. And when the thing being taxed is energy production, getting less of it is not exactly a recipe for lower prices, Wright explained:
Senate Democrats are pushing a Windfall Profits Tax to fix high gas prices. It won’t lower prices by a single cent. It will hurt small businesses and consumers. We’ve tried this before – it failed spectacularly. More on why this is one of Washington’s worst recycled bad ideas.… https://t.co/CdsCV5mzLD
— Steve Forbes (@SteveForbesCEO) May 13, 2026
This same idea is already showing up outside Washington, too. In California, Tom Steyer – famed fossil fuel investor, now an anti-fossil-fuel crusader – is campaigning on the same idea.
But whether the proposal comes from Congress or Steyer’s “fossil fueled” campaign, the problem remains: a windfall profits tax is a cheap political gimmick that would actually raise gas prices for consumers.
The Far-Left’s Favorite Bad Idea Is Back
Windfall profits taxes are politically useful because they sound simple. If oil companies make more money when prices rise, politicians can accuse them of profiteering and promise to claw the money back.
But high gasoline prices are not solved by punishing the companies that produce, refine, transport, and sell the gas consumers need. Higher taxes do not create more supply, and as Gavin Newsom would likely attest, they certainly do not expand refining capacity.
They just make investment in production riskier, which in turn raises capital costs.
That risk assessment matters because unlike what certain politicians claim on cable news, oil companies actually absorb the downside when prices go down.
However, if the government then confiscates profits when oil prices rise, this disincentivizes companies from investing in future supply. That is how a policy sold as “consumer relief” can become a policy that tightens supply and increases prices.
Evidence from Europe offers a real world warning of how this plays out. Three years after imposing its Energy Profits Levy in 2022, the United Kingdom raised the total tax burden on North Sea oil and gas profits to an overall rate of 78%, driving investment away, accelerating production decline, and threatening jobs and energy security. Analysts estimate the British government may have overestimated future tax receipts by about £10 billion because declining production and reduced investment are eroding the very tax base the levy was supposed to tap.
The other irony in this entire debate is the U.S. tax code actually has a version of a “windfall profits tax,” albeit a stable and predictable one known as the corporate income tax. When oil prices rise and energy producers’ profits increase, their corporate income tax bill goes up. That’s how the system should work in highly volatile commodity markets.
The California Version Is Even Worse
This bad idea is not limited to Congress. In California, Tom Steyer is already campaigning on another version of it, promising that as governor he would impose a windfall profits tax on oil companies and return the money “directly to the people,” while accusing producers of overcharging drivers at the pump.
This is a recipe for making California’s self-inflicted energy crisis even worse.
California is already a case study in what happens when politicians pile taxes, mandates, lawsuits, and regulatory costs onto the fuel system while pretending oil companies alone are responsible for the result. The state has some of the highest gas prices in the country, a uniquely constrained fuel market, and ever-growing concerns about refinery capacity.
Californians have heard this story before. Blame oil companies. Promise rebates. Avoid the hard questions about taxes, fuel standards, permitting, refinery closures, import dependence, and the costs of the state’s own policies.
There’s also reason to question whether Steyer’s relentless attacks on oil and gas are still resonating in deep-blue California. A recent PPIC poll found Steyer stuck at just 15 percent support, trailing both Xavier Becerra and Republican Steve Hilton.
Other polls show a closer contest for second in the state’s jungle primary system, but the final public surveys over the weekend all point in the same direction – Becerra is gaining separation, while Steyer remains mired in the second tier.
Bottom Line: A windfall profits tax would not lower prices at the pump, and it certainly wouldn’t create more supply. If politicians want to make future investment riskier and guarantee higher prices for consumers, then a windfall profits tax. If the goal is actually affordability, Congress should focus on policies that produce more energy, protect refining capacity, and reduce policy-driven costs that show up every time Americans fill their tanks.
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