Oil giants cash in on the US-Iran conflict. Can an EU-wide tax on oil profits ease the energy crisis?

Since the US-Iran conflict began on February 28, Europeans have faced higher energy bills. The added costs have gone straight into large oil companies' pockets. ADVERTISEMENT ADVERTISEMENT Greenpeace estimates that oil companies earned €36 billion more from EU diesel and petrol sales than before the war, based on the difference between crude oil and net fuel prices. That’s €154.4 million a day. Diesel accounts for €28.2 billion and petrol for almost €7.8 billion. While the industry rejects claims of profiteering at citizens’ expense, member states are calling for an EU-wide tax on these so-called "windfall" or “super” profits. EU energy ministers discussed bill-cutting measures on October 29 but reached no decision on the tax itself. The winners Europe’s dependence on fossil fuels is what makes these profits possible. “Oil, gas and coal make up nearly 60% of total final energy consumption in the EU”, and the bloc hardly produces any of it at home, explained Noah Gordon, senior policy fellow at the European Council on Foreign Relations. Renewables are pushing gas out of the system, including electricity, said Ben McWilliams, affiliate fellow at Bruegel, but progress is slow, especially in some sectors. “Road transport is still dominated by petrol and diesel, while natural gas dominates home heating”. As the war disrupts shipments and squeezes supply, citizens are left with few alternatives. The report found that refinery operators, especially major oil companies, are the main winners in Europe. Profits were highest at the crude oil production stage, where costs are far below international crude prices, widening the gap with fuel sales. Oil companies' results confirm this. Last month, Shell reported doubling its gains in the last quarter of 2026 to $10.81 billion, beating the $10.33 billion estimate and nearly doubling from $5.43 billion in 2025. French oil giant TotalEnergies reported an adjusted net income of $9.1 billion for July to September, above the $8.3 billion estimate and more than double its $4 billion the year before. British Petroleum Company's (BP) net income hit $8.46 billion in the third quarter of 2026, the highest since 2008, when it was $8.9 billion. Profiteering or passing on costs? The oil industry argues that it isn’t profiting at consumers’ expense. It says its revenues have increased because crude prices have risen, and that it is simply passing those higher costs on. For Gordon, part of that argument holds. "A big reason for rising consumer fuel prices is a shortage of refining capacity. The crack spread, that is, the difference in cost between a barrel of crude oil and a barrel of a refined product, diesel or gasoline, has tripled in Europe since the start of the Hormuz crisis”. But Gordon sees limits to this. "Oil companies are doing more than just passing on the cost of expensive oil. Naturally, as profit-seeking entities must, they are also profiting through increased margins", he told Euronews. Greenpeace says higher crude oil costs can’t fully explain the additional margins. EU pre-tax diesel prices rose 22.7 cents per litre more than crude prices, while petrol prices rose 13.3 cents more. This gap is what crude oil can’t explain, and the report found no significant rise in refiners’ other costs, such as production, refining and distribution. Greenpeace therefore concludes that the difference represents extra margins companies pocketed at the pump. Same war, different margins Margins were highest in the biggest fuel markets. Between March 1 and October 19, Germany’s combined petrol and diesel extra profits were just under €6.7 billion, followed by France (€5.7 billion), Italy (almost €5.1 billion) and Spain (over €4.7 billion). Germany also recorded the highest daily figure (€28.7 million), ahead of France (€24.6 million) and Italy (€21.7 million). Per litre of diesel, margins were highest in Sweden (27.4 ct/l), Spain (26.6 ct/l) and Slovenia (25.4 ct/l). For petrol, they peaked in Denmark (18.4 ct/l), Germany (16.9 ct/l) and Spain (15.5 ct/l). In some EU countries, government measures helped to contain margins. “What mattered most was whether the government set the pump price. In countries with fixed or capped prices (Malta, Hungary, Slovakia, Slovenia, Croatia), diesel before tax went up on average by €0.38 per litre, compared with €0.57 elsewhere”, said Matteo Prina, research group leader at Eurac Research, Institute for Renewable Energy. But price limits do not always guarantee lower margins. “Belgium and Luxembourg also regulated prices, but their maximum price is linked to wholesale prices, so refining margins pass straight through. Tax cuts lowered pump prices, but the price before tax rose just as much in countries that cut taxes as in those that didn’t. That makes me think part of the relief went into margins”, Prina explained. Caps, he added, can also have side effects, like in Slovakia and Slovenia, where national governments had to ration fuel at the pump. What can a tax on oil profits look like? Governments can cushion consumers from higher energy and fuel prices through short-term measures, including cutting energy taxes or subsidies. However, “this largely shifts the costs from energy consumers to taxpayers. It does not change the underlying problem that Europe is paying more to import fossil fuels”, McWilliams explained. That’s why Europe might turn to the profits. While no decision has been taken for now, the EU Commission might consider a windfall tax. Six EU states, including Germany, Portugal, Spain, Austria, Italy and Poland, called for the levy earlier this year, while some countries have already introduced it. Portugal, for example, taxes oil and refining companies’ extraordinary 2026 profits at 33%. The EU imposed a similar windfall tax in 2022, following Russia’s invasion of Ukraine, through the so-called “solidarity contribution”, a minimum levy of 33% on companies’ taxable profits that exceed the average yearly taxable gains since 2018 by more than 20%. The tax raised almost €29 billion, according to a Commission report. Alternatively, Prina explained, the EU could impose “a levy on the gross margin per litre in refining and fuel trading above a reference level, which can be tracked weekly”.