The conflict involving Iran has sparked renewed fears of disruption to global oil supply through the Strait of Hormuz, pushing oil prices above $100 per barrel in March 2026. Because around one-fifth of global oil and LNG trade normally transits through this route, such tensions have immediate effects on prices, inflation, and the cost of living.
This is not an isolated phenomenon. Geopolitical shocks regularly drive commodity prices up, generating large windfall revenues for extractive industries. When these gains typically do not reflect firm productivity or market risk, they constitute economic rents. At the same time, higher commodity prices feed through into everyday expenses, raising transport, heating, and energy costs for households and firms. The coexistence of rising living costs and surging profits in extractive sectors often leads policymakers to question how to design targeted policy responses, such as windfall taxes, for example, to fund emergency relief measures.
In reaction to the energy crisis of 2022, the European Union introduced an emergency solidarity contribution on excess fossil fuel profits (EU Council Regulation 2022/1854), taxing them with a minimum rate of 33%. This experience showed that such measures are politically and administratively feasible. At the same time, recent evidence suggests they may not always capture as much windfall revenue as expected.
This policy brief builds on the working paper “The Global Allocation of Extractive Windfalls” (2026), written by International Tax Observatory researchers Alice Chiocchetti & Ninon Moreau-Kastler. It documents how extractive profits are allocated across jurisdictions, and shows that tax havens capture a significant share of windfall profits during commodity booms.
While extractive multinationals declare most of their profits in producing countries, a significant part of the profits is still recorded in tax havens. For every $1 of profit, around $0.12 are declared in low-tax jurisdictions. During commodity booms, this share increases, with around $0.20 of every additional $1 of windfall profits being recorded in tax havens, where they face much lower effective tax rates.
This highlights a key limitation of existing approaches to tax excess profits. If windfall taxes rely on locally booked profits as their base, that base can be eroded through profit shifting to tax havens—precisely when rents are highest.
The main lesson from the 2022 experience is therefore not that windfall taxes are ineffective, but that their tax base matters. This note highlights two alternative robust approaches:
Both approaches aim to better capture rents in a context where multinational profit shifting remains pervasive.