The sharp rise in energy prices after the Iran war has renewed calls for the European Union to impose a windfall tax on oil and gas firms to help fund consumer relief measures. Finance and economy ministers from Austria, Germany, Italy, Portugal and Spain wrote to EU Climate, Net Zero and Clean Growth Commissioner Wopke Hoekstra this month urging such a levy, saying it would “send a clear message that those who profit from the consequences of the war must do their part to ease the burden on the general public.”
Oil majors have posted large gains as prices surged following the conflict and the blockage of the Strait of Hormuz. A Guardian analysis using Rystad Energy data estimated leading oil and gas companies could pocket an extra $234 billion (€200 billion) by year-end if oil averages around $100. Companies cited among the biggest beneficiaries include Saudi Aramco, Gazprom and ExxonMobil. The Financial Times reported that TotalEnergies earned more than $1 billion after a speculative deal to make roughly 70 cargoes of UAE and Oman crude available in May. BP said this week it had an “exceptional” Q1 2026, with profits more than doubling year-on-year to $3.2 billion.
Supporters point to 2022 as a precedent. That year Brussels adopted a temporary “solidarity contribution” that imposed a minimum 33% tax on oil and gas company profits exceeding the four‑year average by more than 20%. The European Commission’s package of measures announced on April 22 this year sought to reduce consumer pain but stopped short of a new EU-wide windfall tax.
Legal experts warn such levies sit on precarious legal footing. In 2022 the EU relied on Article 122 of the EU Treaty — an emergency route that bypassed the European Parliament and allowed the Commission to propose the measure and the European Council to adopt it by qualified majority rather than unanimity. Cristina Enache of Tax Foundation Europe says many 2022 national windfall taxes were retroactive, which clashes with the legal principle of non‑retroactivity in taxation in many EU countries. She also cites unequal treatment of similar firms, unclear tax bases and proportionality concerns as grounds for likely legal challenges. “In short, these taxes may be feasible, but they are on the edge of constitutionality and legally contentious,” she told DW.
Proponents argue the 2022 experience shows a viable legal route and that EU-level action is needed to capture profits of multinational firms operating across borders. Antony Froggatt, senior director at Transport & Environment, says central coordination is preferable to leaving measures to member states and that it is time for oil companies to contribute rather than pushing costs onto taxpayers. “It’s not unprecedented, there is a mechanism, and there is an experience with doing it,” he said, noting the five member-state request and hoping others will join.
Windfall taxes have already faced court action. ExxonMobil sued over the EU measure in 2022 and Jersey-based refiner Klesch also challenged the levy. Critics emphasise the difficulty of defining a “windfall” in volatile markets without penalising normal profits. Enache argues that basing tax rates on past performance is “inherently coarse” given energy market swings — years of strong profits can offset earlier heavy losses — and that attempting to isolate excess gains can be imprecise.
On effectiveness, opinion is mixed. The 2022 windfall taxes raised over €26 billion, but Enache says this was a “relatively small contribution given the scale of the crisis” and warns of downside effects: heightened uncertainty, weaker investment and potential price impacts later on. She recommends long-term, growth-oriented tax reforms that encourage investment, production and energy diversification to strengthen energy security.
Froggatt accepts the complexity of designing robust legislation but stresses the symbolic and practical value of reclaiming excess profits, arguing any windfall tax should also support accelerating the transition away from fossil fuels. He describes the current phase as the “messy middle” of the energy transition — a period when transitional measures are needed to stabilize supplies while moving faster toward sustainable alternatives.
Both sides agree the crisis underlines the need for strengthened EU energy security, but they differ on means: temporary redistribution via windfall levies versus structural reforms to tax and energy policy that aim to boost investment and diversify supply.
Edited by: Srinivas Mazumdaru