EU considering excessive profit taxes on oil and gas companies

The European Commission is considering a tax on excessive profits from the oil and gas industry as energy prices surge amid the Iran war, following pressure from five EU countries calling for a “fair distribution of the burden”.

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The so-called windfall profit taxes were applied during the 2022 energy crisis to help the most vulnerable countries cope with soaring prices after Russia’s invasion of Ukraine left a natural gas vacuum across the EU.

“Although we are not in the same situation, it is important to take into account the lessons learned from 2022, including the temporary EU solidarity contribution,” Commission spokesperson Louise Bogey told Euronews, referring to the windfall profit tax applied then, which raised around €28 billion of additional public revenue.

The Commission is under pressure from Austria, Germany, Italy, Portugal, and Spain, which have demanded that it consider measures to curb the excessive profits of energy companies to address soaring energy bills.

It is unclear whether the EU executive would consider the call from the five countries, seen by Euronews, to expand this contribution to foreign profits of multinational oil companies.

The current crisis is more acute than the 2022 energy crisis, given the additional shortage of roughly 20% of global oil from the Gulf States, which are unable to cross the Strait of Hormuz, a strategic and vital energy corridor held hostage by Iran as retaliation for military attacks from the United States and Israel on February 28.

But critics of the windfall tax argue that it could deter investment and hurt businesses, ultimately adding to price pressures already driven by market shortages and higher decarbonisationcosts.

Costs and profits

Since the outbreak of the war, several EU countries have rushed to introduce blanket tax cuts on fuels or a price cap on oil and gas, among other measures that typically lower prices artificially.

These measures have already cost €9 billion, according to a recent study by the Institute Jacques Delors assessing the measures introduced by 22 EU countries to cut energy bills.

The figure comes on top of an estimated €13 billion in additional costs from higher fossil fuel imports since the start of the war in Iran.

However, Cyril Widdershoven, a global energy market expert at the consulting firm and think tank Strategy International, maintains that the situation is as bad for the oil companies.

“Where’s the windfall? I don’t see it… even the Strategic Petroleum Reserves oil that is being sold will have to be replenished at higher prices than usual, so which windfalls? Everything’s getting more expensive, including for the oil companies, so their new projects and potential greening efforts too… so which windfalls?” Widdershoven said.

Tijmen Tuisma, a research fellow at the Tax Justice Network, said windfall profits are not generated by business decisions or productivity but by “luck or external, unforeseen events”.

“Taxing these profits does not affect business decisions, including investment,” Tuisma told Euronews.

A study by the campaign group Transport and Environment (T&E) suggests that if current prices and market instability persist until the end of the year, around €20 billion in excess profit could be generated across the road fuel supply chain, accruing to refiners and distributors operating largely within the EU.

If the tax were imposed on crude oil producers and oil-producing nations, the revenue could jump to €51 billion, T&E argues.

“Such a tax can be compared to progressive personal income taxation: if your income is in a lower bracket, the percentage tax that you pay is lower. If your income is in a higher bracket, the tax percentage is higher,” Tuisma added.

In this case,Tuisma added, companies earning unusually high profits—driven not by specific business decisions but by favourable circumstances during unforeseen events—can be expected to contribute more.

Oil and gas industry wary

The oil and gas industry rejects such an idea, saying that a renewed EU‑wide windfall profit tax would undermine investment, weaken energy security, and slow the low‑carbon transition.

“We underline that refining margins are highly cyclical and that repeated extraordinary taxation, following the 2022 solidarity contribution, would create regulatory unpredictability, discourage long‑term investment, accelerate refinery closures, and increase reliance on imports,” reads a statement from FuelsEurope, a trade body representing multi-national oil and gas companies.

But environmentalists are having none of it, arguing that measures that artificially lower prices fail to address the root cause and empty countries’ public funds. Instead, they suggest taxing excessive profits, which they say are “clearly a result of the current energy price crisis.”

Christophe Jost, energy policy coordinator at the NGO Climate Action Network Europe, said above all, the Commission should support EU countries in reducing oil and gas demand through temporary and targeted measures funded by an EU-wide windfall tax.

“Beyond this, reducing fossil fuel dependency and rapidly investing in renewables, storage, electrification and grids needs to be at the core of the EU’s long-term energy strategy,” said Jost.