How is this fair?” That thought may have crossed your mind when filling up at the pump as the price of oil soared last winter after the US and Israel attacked Iran. Here you were, living in an oil-rich province where energy companies were suddenly awash in windfall profits. Where your government was raking in tens of millions of dollars in unanticipated royalties. And where you were paying near-record prices for gas.
According to a study by The Guardian, the world’s top 100 oil and gas companies collected more than $30-million every hour in “unearned” profit during the first month of the Iran war, and stand to make “$230-billion by the end of the year if the price of oil continues to average $100.” That’s a pretty big “if”—but it does put an eye-watering number on the potential windfall for companies in 2026 compared to anticipated profits before the war started. And it’s why people began talking about a “windfall tax” on the companies.
“As the owners of the resource, Albertans should get the lion’s share of those profits,” wrote Alberta Federation of Labour president Gil McGowan in the first week of the war. “And the way to do that is to introduce a windfall profits tax on top of the royalties that oil companies pay in exchange for the right to exploit publicly owned assets.”
This wasn’t a sudden revelation but rather part of McGowan’s long-standing argument that Alberta must increase oil and gas royalty rates. And he’s not alone. A long list of prominent economists have been saying the same thing for years—and they doubled down as the Iran war dragged on into April. “Taxing windfall profits won’t worsen inflation; it will recapture unearned gains from corporations and resource owners and can be used to protect vulnerable populations,” declared a group of economists led by Nobel-prize-winner Joseph Stiglitz.
It all sounds straightforward. Indeed, about 25 countries had already introduced a windfall tax well before Donald Trump’s misadventure in Iran. And Alberta does have a sliding scale for oil sands royalty rates, where they increase relative to the price of oil. But this isn’t enough for critics such as McGowan.
Oil companies are suddenly awash in windfall profits—while we’re paying near-record prices for gas.
Oil companies are pushing back, arguing windfall taxes discourage investment. They quote University of Calgary economist Trevor Tombe, who in 2022 said in an interview that “having a government just enact an ad hoc tax out of nowhere based on just whatever they think the rate should be—that’s problematic because it creates uncertainty.”
We also bump up against the “symmetry argument,” in which oil companies, facing a windfall tax from governments during boom times, could then demand some sort of “calamity compensation” from governments when oil prices collapse—as they did during the COVID-19 pandemic.
To save ourselves from jumping on the never-ending merry-go-round of arguments for and against a windfall profits tax, let’s just ask one short question: Would a windfall tax ever fly in Alberta? The even shorter answer: No.
That’s not just because Alberta is governed by the fossil-fuel champion Danielle Smith. A windfall tax is part of a political suicide trifecta, along with raising royalty rates and introducing a provincial sales tax. The provincial NDP has also shied away from the trifecta. After campaigning in 2015 on implementing “competitive, realistic royalty rates as prices rise,” NDP leader Rachel Notley then performed a whiplash-inducing policy shift upon becoming premier. She went through the motions of a royalty review, then concluded the rates under previous Progressive Conservative governments were suddenly okay.
At the time, an irate McGowan complained that the NDP government was committing a “profound political mistake.” McGowan vowed to continue the battle for higher royalties, a fight that now extends to a windfall tax.
The public appetite for higher royalties comes and goes in direct relation to the world price of oil. When it’s over US$100 a barrel, Albertans practically march on the legislature, demanding a bigger share of energy revenues. When the price drops, so does the appetite. We felt the hunger pangs return last spring, watching our wallets drain as our tanks filled. In that context a tax on skyrocketing oil profits looked pretty good.
But even if there were a windfall profits tax, how would you, as an inflation-pummelled Albertan, benefit? Alberta governments in the past have tended to spend windfall revenue to avoid making hard political decisions. The nadir of that unofficial policy came in 2006, with “Ralph Bucks.” Premier Klein, trying to boost his flagging popularity, gave a $400 “prosperity” cheque to pretty much everyone in the province. A lot of Albertans were happy. Like McGowan today, they saw it as a just counterbalance to high oil prices.
But there was no long-term plan, no saving for a rainy day; just a cheap political stunt. You could still argue a windfall tax is a good idea—but you can’t deny that Alberta has a poor track record of dealing with windfall revenues in the past.
Graham Thomson is an Edmonton-based political commentator who has covered Alberta politics since the early Don Getty era.
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