Germany Leads EU Push for Windfall Tax on Oil Companies as Iran Conflict Drives Energy Prices Higher

Germany and four other European states have called on the EU to examine measures for a windfall tax on oil companies.

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Such a tax was already used in 2022 as an emergency response to high energy prices, according to a letter to EU Climate Commissioner Wopke Hoekstra, which was obtained by the AFP news agency on Saturday. "In view of the current market distortions and fiscal constraints," the European Commission should now "promptly" develop a similar EU-wide instrument.

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The letter is signed by Federal Finance Minister Lars Klingbeil (SPD) and his counterparts from Austria, Italy, Portugal, and Spain. They justify their demand for a European solution for a windfall tax by arguing that it would send a signal "that we are united and capable of action."

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Such a solution would also convey the clear message "that those who profit from the consequences of war must contribute to relieving the burden on the general public."

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The ministers emphasize: "The conflict in the Middle East has led to rising oil prices and is significantly burdening the European economy and European citizens." It is "important to ensure that this burden is distributed fairly."

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A windfall tax was temporarily introduced as a common EU legal instrument following the start of Russia's war of aggression against Ukraine in 2022. Oil, gas, coal, and refinery companies had to pay it on extraordinary profits resulting from high energy prices.

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Specifically, profits exceeding the average value from 2019 to 2021 by more than 20 percent were subject to a 33 percent levy. Through the windfall tax on energy companies, Germany collected nearly two billion euros in 2022. The following year brought in an additional approximately 465 million euros.

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The US and Israel began joint airstrikes on Iran on February 28. Since then, Iran has been attacking Israel as well as several Gulf states and US facilities in the Gulf region with rockets and drones. Iran is also keeping the Strait of Hormuz largely blocked - approximately one-fifth of global oil and liquefied gas transport passes through the strategically important strait. Since then, crude oil prices, among other things, have risen sharply.

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