Big Oil’s Profits and Inflation: Winners and Losers

Abstract We have witnessed a profit and price explosion in the fossil fuel industry that started in 2021 and has increased in the wake of the war in Ukraine. Excess profits have unleashed a redistribution of incomes. This raises the question of who is reaping the benefits and who is paying the bill. In short: Among the winners are fossil fuel companies; high wealth households holding shares in fossil fuel companies, Wall Street and Asset Managers; and companies that can use rising costs as a pretext to increase prices and profits. Among the losers are poor households, Black and Brown and Latinx communities who are also the main victims of climate change in the United States; governments that have seen their budgets burdened by high energy prices; and firms that depend on fossil fuels as inputs and have seen their costs rise sharply and their profits fall. Fossil fuel profit explosions can have implications for macroeconomic stability due to the systemic significance of oil and gas and can harm efforts to mitigate climate change. New policy tools like windfall profits and price stabilization measures are necessary to address fossil fuel profit shocks.