While consumers are facing pain at the pump from sharply higher oil prices, shareholders are set to rake in windfall profits unless governments step in

Paris (France) (AFP) - Prominent economists called Thursday for governments to introduce windfall profit taxes on energy companies who are set to reap financial benefits from the US-Israeli war on Iran.

The war has triggered a surge in prices of oil and gas which will boost the bottom lines of energy firms but is putting the pinch on consumers.

“ICRICT is calling on governments to immediately impose a windfall profits tax on the oil, gas and fertiliser sectors as both economically sound and morally imperative,” said the group of economists led by Nobel prize winner Joseph Stiglitz said in statement sent to AFP.

The surge in energy prices “disproportionately hurts ordinary workers, farmers, and fossil fuel importing nations, while a small group of large corporations and state producers accumulate windfall profits at their expense,” they said.

In addition to higher fuel prices the costs of a number of other critical inputs such as fertiliser have also jumped, raising the risk of a surge in inflation throughout economies.

The economists said a windfall tax on energy and fertiliser firms would target profits made due to the impact of the conflict, not those due to innovation or entrepreneurship.

“Taxing these windfall profits will not worsen inflation; it will recapture unearned gains from corporations and resource owners and can be used to protect vulnerable populations,” they wrote.

They noted that a number of countries had introduced windfall profit taxes on the energy and agribusiness sectors following Russia’s invasion of Ukraine in 2022.

The European Commission said last week it would look into a windfall profits tax on energy companies after five member countries including Germany, Italy and Spain called for one to ease the burden of high fuel prices on consumers.