Five EU states call for windfall tax on oil companies amid Iran war price surge

Austria, Germany, Italy, Portugal and Spain have jointly called on the European Union to impose a windfall tax on oil and gas companies profiting from the Iran war-driven surge in energy prices, citing a 2022 precedent. The five countries' finance and economy ministers wrote a joint letter to EU Climate, Net Zero and Clean Growth Commissioner Wopke Hoekstra, arguing the levy would "send a clear message that those who profit from the consequences of the war must do their part to ease the burden on the general public."

An analysis by the Guardian using data from Rystad Energy found that leading oil and gas companies will make an extra $234 billion (€200 billion) by the end of 2026 if oil averages around $100. BP reported profits more than doubling in the first quarter of 2026 to $3.2 billion, describing the performance as "exceptional." The Financial Times reported that TotalEnergies made more than $1 billion after a speculative purchase of around 70 cargoes of crude from the UAE and Oman available to load in May.

The EU announced a list of measures on April 22 aimed at mitigating the impact for consumers but stopped short of a windfall tax. The five governments said the tax would provide relief for consumers "without placing additional burdens on public budgets." Their letter highlighted the 2022 precedent, when Brussels imposed a temporary "solidarity contribution" of at least 33% on oil and gas company profits that exceeded the average of the previous four years by more than 20%.

The 2022 windfall tax used Article 122 of the EU Treaty, an emergency procedure that bypasses the European Parliament and allows adoption by qualified majority rather than unanimity. That tax gathered over €26 billion in additional revenue. However, Cristina Enache, an economist with Tax Foundation Europe, said the 2022 revenue was a "relatively small contribution given the scale of the crisis." She noted that many of the 2022 taxes were retroactive, which "clashes with a core legal principle in most EU countries: non‑retroactivity in taxation." Enache also cited unequal treatment of similar companies, unclear tax bases, and a lack of proportionality as reasons windfall taxes are likely to face legal challenges. "In short, these taxes may be feasible, but they are on the edge of constitutionality and legally contentious," she said.

ExxonMobil sued the EU in 2022 to block the windfall tax, and the Jersey-based refining company Klesch also took legal action against the levy. Enache argued that "there's no precise way to define a 'windfall' in a volatile industry without over‑taxing normal profits" and that tax rates based on previous performance are "inherently coarse" given market volatility. "Years of high profits often compensate for years of heavy losses," she said.

Antony Froggatt, senior director at Transport & Environment, an NGO advocating for sustainable transport, said the EU should take leadership at a central level to target multinational firms. "Instead of governments putting the burden on taxpayers, it's time that oil companies pay up," he said. Froggatt acknowledged the legal challenges but said the 2022 tax was largely successful. He added that the EU should "move much further and faster to reduce the reliance on fossil fuels" to create more energy stability. Froggatt described the current period as "the 'messy middle' of the energy transition," saying there is "a need to power through this so-called messy middle in order to create more energy stability."