Europe's oil majors reap $22bn profits amid escalating windfall tax clash

Six of Europe’s largest oil companies posted combined first-quarter profits of $22 billion, a figure more than 40 percent higher than last year. The surge mirrors massive second-quarter earnings from US rivals Exxon Mobil and Chevron, which were propelled by record diesel production and a sharp spike in global energy prices.

The financial windfalls are a direct result of the conflict between the US and Iran, which has effectively closed the Strait of Hormuz. Iranian forces fired drones at Kuwait and targeted oil tankers in the vital waterway this week, causing four vessels to turn around. Combined with refinery damage in Russia and the Middle East, the disruptions have left Asian markets short on crude and pushed US oil prices to fluctuate between $68 and $115 a barrel.

For European policymakers, these profits present a dilemma. The UK and other European countries have already extended temporary windfall profits taxes on fossil fuel companies through 2030. However, Exxon CEO Darren Woods warned on Friday that such policies carry a direct cost to the continent.

“We canceled investments that we had planned for Europe based on the last time they passed a windfall profits tax,” Woods told investors. He argued that American refineries are running at near-full capacity to compensate for global shortages, making it “very short-sighted” to penalize those suppliers.

A similar political debate is now unfolding in Washington. Democratic lawmakers have proposed taxing major producers for profits from 2026 onward, targeting companies that produce or import at least 300,000 barrels per day. Senator Sheldon Whitehouse defended the measure, stating: “It’s fair to put a windfall profits tax on inordinate windfall profits rather than cut off children’s food programs.”

The industry’s gains are drawing sharp criticism from advocacy groups. Patrick Galey, fossil fuels lead at Global Witness, noted that oil producers are among the constituencies “having a very good crisis.” He contrasted their returns with the hundreds of millions of people facing electricity curbs and food price inflation linked to fertilizer disruptions.

In response to the cascading maritime threats, Saudi Arabia announced a 14-nation Red Sea defense alliance to secure energy corridors. The coalition includes Turkey, Egypt and Pakistan, though Oman and the United Arab Emirates declined to back the initiative.