A tax levied by governments against certain industries when economic conditions allow those industries to experience above-average profits. Windfall taxes are primarily levied on the companies in the targeted industry that have benefited the most from the economic windfall, most often commodity-based businesses.

During periods of higher oil and gas prices, the producing companies make huge profits since often the cost of production remains stable. Such profits are known as windfall profits and sometimes there is a demand to tax the companies when these profits rise unexpectedly.

In 1980, the US federal government passed the crude oil windfall profit tax (WPT) on the country’s oil industry. The main purpose of the tax was to return to the federal government that part of the income that would have gone to the oil producers due to lack of supervision on oil prices, that led to the high oil prices as determined by OPEC. The tax however was repealed in 1988 due to concerns that the tax was discouraging domestic oil development.