FOR IMMEDIATE RELEASE

Contact: Mia Huang, mia@taxpayer.net
Date: July 9, 2026

Washington, D.C. – As global oil markets reel from the war in Iran and disruptions in the Strait of Hormuz, a new analysis from Taxpayers for Common Sense shows that the federal tax code continues to funnel tens of billions of taxpayer dollars to an already highly profitable oil and gas industry. The report, Understanding Oil and Gas Tax Subsidies: How the Tax Code Favors Oil and Gas Production and What It Costs Taxpayers, finds that targeted tax preferences for oil and gas, combined with broader structural tax breaks, will cost taxpayers at least $51 billion between FY2025 and FY2029, on top of hundreds of billions already spent over the last century.

“Oil and gas companies are reporting strong cash flows, beating profit expectations, and increasing dividends and share buybacks, all while benefiting from tax rules that most other industries do not receive,” said Autumn Hanna, Vice President at Taxpayers for Common Sense. “Taxpayer dollars should not be padding the bottom lines of a mature industry that is already posting windfall profits from high energy prices and geopolitical turmoil.”

A Mature, Profitable Industry Still Receiving Century-Old Tax Breaks

The report documents how many of the industry’s core tax preferences were enacted when domestic oil and gas production was relatively small and the industry was still developing. Provisions such as expensing intangible drilling costs, dating to 1916, and percentage depletion, enacted in 1926, were originally justified as ways to encourage exploration and reduce investment risk.

Today, however, the United States is a leading producer and a net exporter of oil and gas. Crude oil and natural gas production are at or near record levels, and liquefied natural gas exports rank among the highest in the world. Despite this, oil and gas companies continue to benefit from generous industry-specific tax provisions that depart from the baseline rules applied to most other businesses.

Recent data underscore the disconnect between industry performance and continued subsidies. Analysts project that six of the world’s largest oil and gas companies will earn roughly $94 billion in profits in 2026, nearly $3,000 every second, as households face higher energy costs. Companies including ExxonMobil, Chevron, BP, Shell, and TotalEnergies reported stronger than expected first quarter earnings this year, exceeding forecasts in part because trading and refining operations benefited from price spikes linked to conflict in the Middle East.

Key Findings: At Least $51 Billion in Targeted Preferences, Plus Much More

Using estimates from the Joint Committee on Taxation, the Treasury Department, and the President’s budget, the report identifies a range of industry-specific provisions and broader tax preferences that deliver substantial benefits to oil and gas companies. The analysis finds:

• At least $51 billion in taxpayer costs between FY2025 and FY2029 from targeted federal oil and gas tax preferences, including percentage depletion, expensing of intangible drilling costs, carbon oxide sequestration credits, favorable treatment of foreign tax “dual capacity” payments, and special rules for master limited partnerships.
• Several provisions allowing oil and gas companies to deduct more than their original investment or recover costs far more quickly than standard income tax rules allow for comparable activities in other industries.
• Additional tens of billions of dollars in broader tax expenditures, such as Last In, First Out inventory accounting and bonus depreciation, that apply across the economy but disproportionately benefit capital-intensive, inventory-intensive industries like oil and gas.

At the same time, many of the tax preferences highlighted in the report were not enacted in response to today’s geopolitical instability or short-term supply disruptions. They are longstanding structural features of the tax code that allow oil and gas producers to bypass standard income tax rules, from percentage depletion that can exceed a company’s original investment in a well, to the expensing of intangible drilling costs, to targeted credits for enhanced oil recovery and marginal wells.

“These are hidden subsidies buried in the tax code,” Hanna concluded. “If Congress wants to reduce the deficit and protect taxpayers, reining in outdated, distortive oil and gas tax preferences is a logical place to start.”

###