As consumers struggle with rising energy costs, Windfall Taxes (OTC:WINKF) on oil companies are a global topic of discussion. TotalEnergies TTE is attempting to prevent a price war by committing to lower prices. From September to November, the company will reduce fuel prices by 20 Eurocents per liter compared to global market prices, and by 10 Eurocents per liter from November to the end of the year. This week, the price of gasoline in France was estimated at €1.95 per liter, or about $7.50 per gallon, so the initial reduction amounts to a 10 percent decrease.
Patrick Pouyanné, chairman and CEO of TotalEnergies, stated that his company would rather give immediate and direct assistance to its customers than impose an indirect tax that would punish its refineries. French legislators have suggested levying up to a 25% tax on the nation’s largest energy and transportation companies. When asked if the reductions would continue if France implemented the tax, TotalEnergies remained silent.
Royal Bank of Canada analyst argues in a new report that unanticipated revenues from energy royalties and corporate taxes are flooding government treasuries, offsetting the need for a Canadian version of a Windfall Tax (OTC:WINKF) on oil and gas companies, which is high on the political agenda in Europe and elsewhere.
Michael Harvey, an analyst at RBC Capital Markets, the investment banking arm of Royal Bank, projected that soaring energy prices have increased the taxes and royalties paid by public Canadian energy companies by 200 percent year-over-year to around $48 billion in 2018.
Harvey estimates that by 2023, the contribution of publicly traded oil and gas businesses in Canada to federal and provincial revenue will rise to $64 billion. This should discourage governments from following the United Kingdom’s example and seeking a larger share of rising energy costs. Both the royalty and tax systems already have the mechanisms in place to provide governments with windfalls when prices are high, Harvey wrote in an email.
In France last year, TotalEnergies ran 3,479 service stations. The share price of TotalEnergies increased a little bit on Friday and has increased 35% this year.
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