how windfall profits work
among the reasons that windfall profits can arise are a sudden change in market structure an executive order from the government a court ruling or a dramatic shift in trade policy companies that are beneficiaries of windfall profits had not planned for them but they would be naturally pleased to receive them these profits would have a variety of uses dividend increases or a special one time dividend share buybacks reinvestments in the business for future growth or debt reduction windfall profits are presently not taxed in the u s though there have been tepid efforts to reintroduce the tax for an individual a windfall profit might result in a sudden boost in their income beyond what they could have reasonably expected unlike a corporation an individual is not expected to pass the profits on to others example of windfall profitsfrom time to time surging prices for crude oil and natural gas have generated windfall profits for many energy companies in this industry wherein supply and demand are the main force determining price levels for the commodities unexpected supply shortages have led to sharp and quick price rises in 2008 a barrel of wti crude oil climbed above 140 from 60 per barrel just one year earlier several factors on both the supply and demand sides conspired to spike the price turmoil in the middle east lingering effects of hurricane katrina supply disruptions in venezuela and nigeria strong demand from developing nations and speculative fervor by traders were all believed to be causes of the steep ascent of oil prices windfall profits for oil and gas producers followed but they proved short lived because a mere five months after the price peaked a barrel of oil was trading at only 40 per barrel 2