You may have noticed what it costs to fill up your car these days. The companies selling that fuel just posted some of the biggest profits in their history, and one senator wants to stop the tax code from helping them make even more overseas.
New Mexico Democrat Martin Heinrich will introduce a bill that would remove the U.S. tax-code advantages oil and natural gas companies currently get when they pump overseas. The measure, first provided to CNBC, would make income from overseas oil and gas extraction face the same tax rules as other foreign business income.
The bill also takes aim at two tax-code provisions involving foreign tax credits. Those credits are meant to stop companies from paying tax on the same income twice, once in the U.S. and once abroad. It would end a provision that lets companies earn extra foreign tax credits by combining shale-oil and tar-sands income with their other foreign oil-and-gas earnings. It would also stop companies from labeling payments to foreign governments as taxes when those payments are really royalties, a practice that lowers their U.S. tax bill.
"Oil majors shouldn't get a tax break for going overseas to produce energy, but that's essentially what our current tax policy does," Heinrich said.
The senator, who is the ranking Democrat on the Senate Energy and Natural Resources Committee, says the change would put American producers on fairer footing. "This would help put American energy development on an even playing field with energy development that's happening in the Middle East or anywhere else," he said.
Large oil companies worldwide posted very strong second-quarter earnings last week as the Iran conflict pushed crude prices up. Chevron reported net income of $12 billion, up nearly 400% from $2.5 billion in the same quarter a year earlier.
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Exxon posted $14.5 billion in profit, more than double the roughly $7.1 billion it earned in last year's second quarter. That kind of cash tends to draw attention in Washington, and President Trump has already demanded a piece of it.
He attacked large U.S. oil and natural gas companies for making "too much money" as the Iran war drove pump prices higher. Trump also said ExxonMobil and Chevron would have to "give some of that back to the public, and they better cut the retail price, the consumer price."
Trump is not just pushing for lower prices at the pump. He has also urged U.S. oil and gas firms to invest in Venezuela after removing former President Nicolás Maduro. So the same companies are hearing a mixed message from Washington: invest abroad, even as a proposed bill would make investing abroad less rewarding.
The proposal arrives during a period of unusual tension between the White House and the oil industry. Trump wants the companies to expand in Venezuela and cut consumer prices at the same time, while Heinrich wants to tax their overseas operations more heavily.
Election-year pressure is part of the backdrop. AAA said the average U.S. gasoline price was $4.06 per gallon on Thursday, a number that could be a factor in November's midterm elections. The profit numbers from Chevron and Exxon have already made energy costs a political issue in Washington.
Tax bills like this one move slowly, and this one faces an uncertain path. But the message behind it is simple: when oil companies are making billions, Congress is in the mood to talk about who gets to keep it.
For investors, any change to how overseas profits are taxed could trim future earnings for companies like Chevron and Exxon. That is one more factor to think about alongside the usual questions about crude prices and global demand.
For drivers, this bill will not change the price at your local station anytime soon. Gas prices are tied to crude markets and world events, not to a Senate proposal.
Heinrich puts it plainly: "At a time when oil majors are making billions in profits per quarter, they can afford to pay their fair share."
Whether that fair share becomes law is up to Congress.
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