Exxon Mobil Corp. (XOM.N), the largest oil company in the United States, is suing the European Union to get it to repeal the bloc’s new windfall tax on oil companies. Exxon Mobil claims Brussels overstepped its legal bounds by enacting the tax.
This year’s record profits for oil companies, which benefited from high energy prices, increased inflation globally and renewed calls for additional taxes on the industry.
The windfall profits tax undermines investor confidence, discourages investments, and is ineffective. Exxon will consider the tax when deciding whether to make upcoming multibillion-euro investments in Europe’s energy supply and transition.
EU nations approved emergency levies on energy companies’ windfall profits in September. These levies include one on fossil fuel companies’ excess profits in 2022 or 2023 and another on the extra money low-cost power producers make from rising electricity prices.
The “temporary solidarity contribution” is expected to result in approximately 25 billion euros in public funds distributed by EU governments.
After falling more than $2 earlier in the session, oil prices rose as a weaker dollar helped calm demand concerns sparked by the rise in COVID-19 cases in China.
February Brent futures were down 96 cents, or 1.15%, at $82.30 per barrel. The more active March contract dropped by over $2 earlier in the session before dropping 1.2% to $82.98/bbl.
After hitting session lows of $76.79, U.S. West Texas Intermediate crude futures dropped $1.13, or 1.43%, to $77.83 per barrel.
The Federal Reserve is attempting to prevent price increases in a tight labor market by raising interest rates, which has caused uncertainty in the oil markets.
In the week ending December 23, U.S. crude oil inventories decreased by about 1.3 million barrels, less than anticipated.
European Natural Gas Prices Fell
Natural gas prices in Europe fell this week to lows not seen since Russia invaded Ukraine. In recent weeks, front-month natural gas futures on the Dutch Title Transfer Facility, the standard contract in Europe, fell to a low of fewer than 77 euros ($81.91) per megawatt hour, the lowest level since February, just before the start of a full-fledged conflict in Ukraine. Nevertheless, the unseasonably warm weather that has persisted throughout the winter in much of northwest Europe has decreased the need for heating and allowed the continent to restock its gas supplies after several cold snaps had depleted them over the previous few months.
As nations temporarily gained the upper hand on supply issues, Goldman Sachs predicted in November that European gas prices would fall precipitously in the coming months.