Higher oil prices usually mean fatter checks for energy firms. This time, the picture is messier.
French President Emmanuel Macron said Monday that European energy firms aren't making undue profits from the Iran war or the closure of the Strait of Hormuz. He added a warning. If the math starts to favor those firms, EU governments will step in.
Macron made the remarks at a meeting of EU leaders in Armenia. The Strait of Hormuz is the narrow waterway that handles roughly 20% of the world's oil trade. It's been mostly blocked by Iran since late February.
That was when the US and Israel launched air strikes on Iran. Iran's supreme leader was killed in the fight.
Macron also called for a joint reopening of the Strait by both Washington and Tehran.
Crude prices have jumped on the closure. That's why the windfall tax question matters now.
EU governments hit oil and gas firms with one-off taxes in 2022 after Russia's invasion of Ukraine. Macron is saying that tool is back on the table.
Q1 earnings tell a mixed story. BP more than doubled its first-quarter profit from a year ago. Exxon's profit fell 45% to $4.2 billion in the same span.
Two reasons explain the gap. First, the Iran war has knocked out shipping routes and hurt oil output in the region. So volume is down.
Second, many firms hedged at lower prices before the spike. That means they locked in lower profits before the rally hit.
In other words, oil is up. But the amount oil firms sell at that price is down. Some are stuck on older, cheaper deals.
Europe has used the windfall tax tool before. In 2022, after Russia's invasion of Ukraine, the EU set up a one-off tax on energy firm profits. The aim was to fund relief for households crushed by high power bills.
That tax raised tens of billions of euros across the bloc. It also hit big oil and gas firms like Shell, BP, and Total.
Macron's warning sets up the same playbook. If European energy firms start to post real war-driven profits, the tax could come back fast.
The big four to watch are Shell, BP, Total, and Eni. All four are major refiners and major shippers.
A windfall tax tends to hit the biggest names hardest. It also tends to spook the broader group of energy stocks for a few weeks. That's true even when smaller firms are spared.
Bond markets tend to react fast too. A windfall tax cuts cash flow, which can hit the credit rating of the biggest names.
The next two earnings cycles will show whether the windfall profits Macron warned about really show up. If hedges roll off and shipping recovers, profits could spike fast. That's when the push for windfall taxes will return.
For now, watch the gap between crude prices and reported earnings. The wider it gets, the louder the calls for a tax will get.
Macron didn't blame anyone. He simply put them on notice.
