Where are the profits of the war going?
With the rise in oil prices, the profits of extractive companies surge—and a significant share ends up funneled through tax havens. But it’s not too late to tax war profiteers effectively.
In the 1970s, both policymakers and the public took it for granted that the windfall profits generated by the oil price shocks of 1973 and 1979 should largely be captured for the common good.
Some producing countries—notably Saudi Arabia and Venezuela—nationalized their oil industries (between 1973 and 1980 in the former, and in 1976 in the latter). Others chose instead to impose extremely high taxes, close to outright confiscation.
The United States introduced a windfall profits tax in 1980 at a rate of 70%, on top of the standard corporate tax of 46%, bringing the total tax take to nearly 85%. The United Kingdom adopted a similar approach in 1975.
This was in line with how governments had treated wartime profits earlier in the century: in 1942, the United States had taxed excess profits at 95%. The principle was clear: profits driven by war, geopolitical upheaval, or resource shocks were not meant to accrue to private interests.
As a result, the enormous fortunes generated by the surge in oil prices largely eschewed the major oil companies and their shareholders.
They were not pleased and vowed it would never happen again.
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From the 1980s onward, oil companies—the paradigmatic multinationals of the twentieth century—contributed to reshaping the rules of the global economic system in ways that would safeguard their profits.
In the new international order that emerged, which came to be known as globalization, two key mechanisms ensured that the experience of the 1970s would not be repeated.
First, tax competition between countries became naturalized and weaponized. Oil reserves can’t be moved, but investment can. “Tax us too heavily here—in the UK or Norway—and we’ll invest elsewhere, in Russia or Canada” said in substance the oil companies. Under this pressure, producing countries gradually lowered their tax rates on extractive industries.
Second, the rapid expansion of tax havens gave multinationals a powerful new tool. If governments tried to tax too much, firms could simply shift their profits, on paper, to low-tax jurisdictions, using transfer pricing and other financial techniques.
Recent research by economists Alice Chiocchetti and Ninon Moreau-Kastler shows that under normal conditions, about 12% of extractive-sector profits are shifted to tax havens, in places like Bermuda, Luxembourg, or Singapore. During periods of excess profits, that figure rises to around 20%.
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The result has been a steep decline in effective tax rates in the oil industry. While these rates remain higher than in other sectors—it is hard, after all, to hide that you’re extracting oil—they have fallen dramatically over the past fifty years.
The clearest evidence comes from U.S. multinationals, for which long time series exist.
On the eve of the first oil shock, American oil companies paid roughly 65% in tax on their foreign profits. By the mid-1970s, that figure had climbed to 90% (not counting the impact of nationalizations). From the 1980s onward, this rate declined steadily, reaching just 37% in 2023.
Concretely, about 90% of oil rents were effectively socialized in the 1970s. Today, roughly two-thirds end up in the hands of shareholders.
That helps explain why, as oil prices have surged, oil company stocks have soared since the onset of the Israeli-American strikes in Iran, and earlier abduction of Nicolas Maduro in Venezuela.
The index of the world’s 120 largest oil and gas companies—half of them American—rose by 30% in the first three months of 2026. This increase already far exceeds what was observed after the invasion of Ukraine in 2022.
The paradox is hard to miss: at a time when reducing fossil fuel use is more urgent than ever, the financial rewards for continuing extraction have never been higher.
“When oil prices rise, we make a lot of money,” Donald Trump candidly said in March. By “we,” he meant oil companies—major backers of his campaign—and well-off households, those who own shares. Gasoline prices may rise, but unlike in the 1970s, many people in the US—especially many people dear to Trump—ultimately benefit through their financial assets.
It is difficult to make sense of the length of the conflict in Iran if one ignores this unpleasant arithmetic.
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What is to be done?
In 2022, the European Union introduced a 33% tax on windfall profits in the oil and gas sector, euphemistically labeled a “solidarity contribution.” In April 2026, several EU member states called for a similar measure to be reinstated.
But design matters, and recent experience shows how easy it is to get this wrong. In France, the measure raised almost nothing: €69 million instead of the €3 billion that had been expected.
Part of the explanation lies in policy choices: France implemented the rule narrowly, excluding much of the oil sector. But another key factor is profit shifting to tax havens.
As revealed by the research of Alice Chiocchetti and Ninon Moreau-Kastler, about 20% of windfall profits are shifted to offshore financial centers. The remaining profits are recorded in producing countries, not in refining or consuming countries like France.
This is not an unavoidable outcome but a policy choice. A more effective approach would be to tax companies on their global windfall profits, which are far harder to manipulate, rather than on the excess profits they report in any single country.
The potential revenue from such a robust windfall tax is substantial. In 2022, TotalEnergies earned around €10 billion in windfall profits worldwide. Taxing that at 90%—roughly in line with rates seen before the 1980s—would generate about €9 billion, or roughly €130 per person in France, €650 for a family of five.
Those revenues could then be redistributed directly to citizens, as is done in Alaska, which has long paid out oil dividends to residents, amounting to $1,704 per household in 2024.
Other approaches are possible, such as taxing increases in oil companies’ stock market values (as proposed in 2022 by the EU Tax Observatory, now known as the International Tax Observatory) rather than accounting profits.
Whatever the exact tool used, one thing is clear: it would be unacceptable for companies—such as TotalEnergies—that profit at the expense of our planet and that deepen our dependence on petro-states to be allowed to go scot-free, as they did in 2022.
Like their 20th century predecessors, war profiteers must pay.
I write a lot about the damage to Panama, on top of that to rich-nation workers, because of the country's tax-haven status. Seems to me substantially more public pressure should be applied by US and EU officials on their governments. Why do you think this hasn't happened?