Big Oil's $130B Windfall Meets High Gas Prices Before Midterms

US oil companies earned more than $130 billion in the six months after the Iran war began — nearly triple their profits in the same period a year earlier. Over the same stretch, American consumers spent an extra $147 billion on gasoline and diesel, or more than $1,100 per household on average. The figures, compiled by Zhihu author Steven Li, point to more than energy price swings: they describe a vast redistribution of wealth from people at the gas pump to shareholders of ExxonMobil and Chevron.

The timing matters because it hits two sensitive spots at once: inflation and the election. With the midterms only days away, gasoline prices are heading toward the most expensive Election Day in US history. Energy also carries heavy weight in inflation data, which directly shapes voters’ wallets and moods.

Oil profits double as household bills climb

ExxonMobil’s third-quarter profit doubled from a year earlier to $15.4 billion, while Chevron’s came close to $10 billion. Both set records for fuel-related earnings. Ordinary Americans, by contrast, have seen real hourly wages turn negative once inflation is factored in. The oil windfall is not a side effect of inflation; it is an engine of cost-push inflation. Average gasoline prices have reached $4.23 a gallon and diesel $6.33, with energy prices up more than 35% year on year. That has pushed overall PCE inflation to 3.6% and core PCE to 3.1%, ever further from the Federal Reserve’s 2% target.

The effect on monetary policy is asymmetric. Rate hikes can suppress demand, but they cannot break a blockade of the Strait of Hormuz or ease a shortage of refining capacity. The Fed can hold rates at 3.75%–4.00%, but ordinary households are expected to pay 21% more for heating oil this winter. Inflation has not been tackled at the root; it has been put on hold.

Gas prices become a political flashpoint

The cost of that delay now falls on the midterms. With only days to go before Election Day, gasoline prices are heading toward the most expensive Election Day in US history. Former President Trump said at a rally: “I don’t give a damn, we’re making a lot of money.” The political damage lies in how bluntly it puts the distributional question on the table: who benefits, and who pays.

Democrats have said that if they retake the House, oil industry windfalls will face congressional hearings. More tellingly, Trump himself has publicly complained that oil companies are “making too much” and, under pressure from within his party, directed the Justice Department to investigate “price gouging.” A president who bills himself as pro-fossil-fuel opening fire on his traditional donors before an election suggests the political pain of high gas prices now outweighs ideological comfort.

Inflation fix vs. political accountability

For inflation, oil windfalls mean energy costs stay high, the Fed’s room to maneuver shrinks, and a soft landing becomes harder. For the election, high gas prices translate directly into voter discontent and could sway results in swing districts. Views divide along familiar lines: some argue oil companies simply seized a market opportunity and that a windfall tax would deter investment; others argue that such profits lack legitimacy in wartime and that Congress should investigate.

Either way, one fact is hard to avoid: as ordinary families pay 21% more for heating oil, oil majors’ shareholders are collecting record dividends. That contrast is itself fuel for political mobilization. The midterm results may offer a first answer to the question of who pays.

Source: Zhihu https://www.zhihu.com/question/2100008044641907246/answer/2100034044515857912?utm_medium=openapi_platform&utm_source=b38f6831b176