Six countries want EU talks in September on taxing windfall profits of oil companies

Finance ministers from countries including Germany and Spain wrote to Ireland as EU president asking for the measure to ease the cost of living for the general public

Oil prices have risen about 25% from levels at the outbreak of the US-Israeli war on Iran on February 28.

Six European Union countries want the 27-nation EU to discuss in September a mechanism to tax windfall profits of oil companies triggered by Iran's blockade of the Strait of Hormuz, a letter by their finance ministers showed on Monday.

In a letter to Ireland, which holds the rotating presidency of the EU, Germany, Spain, Portugal, Italy, Poland and Austria are asking the presidency to put the issue on the agenda of the next EU finance ministers' meeting in Dublin on September 18 and 19.

"We are experiencing one of the biggest supply shocks in decades, and all over the world there is growing discontent about the rise in the cost of living," the six finance ministers wrote in the letter, seen by Reuters.

"Government measures taken so far have not been sufficient to reduce or stabilise prices for businesses and citizens on a permanent basis. This is why we need a common approach, one that ensures that those who are profiting from the crisis do their part to ease the burden on the general public," they said.

Oil prices have risen about 25% from levels at the outbreak of the US-Israeli war on Iran on February 28, while prices of refined products surged more — European diesel prices rose more than 70% since the war began, while gas prices have climbed about 20%.

"To this end, we need to address the matter of high energy prices by discussing an EU-wide framework to tax windfall profits, taking into account lessons learned in 2022, this time with a more specific analysis of how the foreign profits of multinational oil companies can be included in a more targeted way," the letter said.

The ministers also said they wanted to see the results of a European investigation into refiners' margins as soon as possible, to make sure refineries are not taking advantage of the current energy price spike.

Oil prices slipped more than $1 a barrel on Monday as investors took profits ahead of an expected announcement from Washington about imposing more sanctions on Iran that may further disrupt supplies from the Middle East.

Brent Crude and West Texas Intermediate both posted their second consecutive weekly gains last week, up more than 5%, as peace talks between the US and Iran hit a stalemate, capping oil shipments through the Strait of Hormuz, where a fifth of the world's supply used to transit.

"Oil slipped after a two-week rally as traders awaited the US plan to economically isolate Iran due later Monday," said Saxo Bank analysts in a note.

Iran has condemned US plans to announce new sanctions even as President Masoud Pezeshkian called for a diplomatic solution.

"The more pragmatic members of the Iranian leadership would prefer to de-escalate but the hardliners would probably prefer to fight to the bitter end," IG markets analyst Tony Sycamore said.

"I think by the end of this week we will have a good idea which side of the Iranian leadership has the upper hand."

Offers of Iranian crude to Chinese buyers have declined and prices have jumped as the US blockade has cut Tehran's shipments, according to trade sources.

However, Iran has granted permission for a number of Iraqi oil tankers to pass through the Strait of Hormuz following repeated requests from Baghdad, Iran’s state news agency IRNA reported on Saturday.

Some analysts expect the recovery in supplies from the Middle East to take even longer than anticipated as the US-Iran conflict persists.

"Crude [supply] is tightening. Recent weeks have seen one of the sharpest declines in oil-on-water, whilst onshore inventories are declining as well, including in China," said Morgan Stanley analysts in a note.

"A reduction in supply is driving this, most notably from the Middle East, where several data sources put aggregate exports back at March/April levels," they said, slowing their assumption for a recovery in Middle East supplies.

Meanwhile, fewer than 20 commodity vessels transited the Strait of Hormuz at the weekend, shipping data showed on Monday, as Iranian and US blockades restrict traffic through the chokepoint for energy shipments.

Reuters