UN chief calls for taxation on windfall profits of oil and gas companies

United Nations | Xinhua | UN Secretary-General Antonio Guterres on Wednesday called for taxation on windfall profits of oil and gas companies to ease the impact of the energy crisis on the most vulnerable people.

“It is immoral for oil and gas companies to be making record profits from this energy crisis on the backs of the poorest people and communities and at a massive cost to the climate,” said Guterres at the launch of the third report of his Global Crisis Response Group on Food, Energy and Finance over the Ukraine conflict.

The combined profits of the largest energy companies in the first quarter of this year are close to 100 billion U.S. dollars, he noted.

“I urge all governments to tax these excessive profits and use the funds to support the most vulnerable people through these difficult times,” he said. “And I urge people everywhere to send a clear message to the fossil fuel industry and their financiers that this grotesque greed is punishing the poorest and most vulnerable people, while destroying our only common home, the planet.”

All countries, and especially developed countries, must manage energy demand. Conserving energy, promoting public transport and nature-based solutions are essential components of that, he said.

There is also a need to accelerate the transition to renewables, which in most cases are cheaper than fossil fuels. At the same time, private and multilateral finance for the green energy transition must be scaled up, he said.

Every country is part of this energy crisis, and all countries are paying attention to what others are doing. There is no place for hypocrisy, said the UN chief.

Developing countries don’t lack reasons to invest in renewables. Many of them are living with the severe impacts of the climate crisis. What they lack are concrete, workable options. Meanwhile, developed countries are urging them to invest in renewables, without providing enough social, technical or financial support, he said.

Some of those same developed countries are introducing universal subsidies at gas stations, while others are reopening coal plants. It is difficult to justify such steps even on a temporary basis, he said. “If they are pursued, such policies must be strictly time-bound and targeted, to ease the burden on the energy-poor and the most vulnerable, during the fastest possible transition to renewables.”

The Ukraine conflict, apart from the damage within the country, is having a huge and multi-dimensional impact far beyond the borders, through a three-fold crisis of access to food, energy and finance, he said.

Household budgets everywhere are feeling the pinch from high food, transport and energy prices, fueled by climate breakdown and war. This threatens a starvation crisis for the poorest households, and severe cutbacks for those on average incomes, he said.

Many developing countries are drowning in debt, without access to finance, and struggling to recover from the COVID-19 pandemic and could go over the brink. There are already the warning signs of a wave of economic, social and political upheaval that would leave no country untouched, he warned.

UN Conference on Trade and Development Secretary-General Rebeca Grynspan, a member of the Steering Committee of the Global Crisis Response Group, who launched the report together with Guterres, warned against a potential “scramble for fuel.”

“Decisions by the countries that consume the most energy have global implications for the rest of the world, and especially for the smallest and poorest countries that have little influence in these markets. After two years of a pandemic that was marked by extreme inequality, especially in vaccines, the world cannot afford another scramble, these times on fuels,” she said.

In a month, summer will be over, and the world will enter peak energy demand season, which is winter in the Northern Hemisphere. As the colder months draw near, the pressure governments feel today will get even worse. The only way to relieve this pressure is by working together — by avoiding at all costs a scramble for fuels, by shielding the vulnerable from energy poverty, by managing demand in a fair and equitable way, and by investing and doubling down on the energy transition, she said. “The short term and the long term start at the same time. And that time is now.”

Since the second report of the Global Crisis Response Group two months ago, the situation in terms of commodity prices has improved, she noted.

Crude oil is now around 93 dollars a barrel, down from 120 dollars in June. Wheat prices are down almost 50 percent from their peak. Corn and fertilizer prices are almost 25 percent down from a month ago. Shipping costs are about 10 percent lower since June. Only natural gas has bucked the trend and is still higher than a month ago, she said.

“These are positive developments, as falling prices are key to breaking the vicious cycle of rising costs, rising inflation, rising interest rates, and rising poverty,” she said. “Falling prices are good news but the efforts to improve the humanitarian situation are only starting. Prices have already been too high for too long.”

Since June, forecasts for extreme poverty and food insecurity have risen by 71 million and 47 million people, respectively. And the finance dimension of the crisis is also concerning, she said.

Since inflation was rising in all regions of the world, and especially in developing countries, interest rates rise, and debts are becoming much more expensive to pay. Bond spreads in developing countries are increasing by about 15 percent since June. The International Monetary Fund now says that not only are 60 percent of low-income countries’ debts in or near debt distress, but also 30 percent of middle-income countries’ debts are in or near debt distress. Also, about 40 billion dollars have left emerging market funds since the beginning of the year. And Global South currencies have also depreciated against the U.S. dollar, by about 5 percent since June, she said.

“As a result, imports in developing countries are becoming more expensive and domestic prices are increasing even as international prices fall. This is another sign of the interconnected nature of this crisis, of the vicious cycles we need to break. And this is proof, again, of the messages we have been giving in this Global Crisis Response Group since the beginning,” said Grynspan.