Market News

By Dare Olawin

The Secretary General of the Organisation of Petroleum Exporting Countries, Haitham Al Ghais, has revealed that taxes imposed by major oil-consuming countries, not oil prices, are the primary driver of fuel costs.

He explained that the prices paid by consumers at the pump were determined by various factors, including the price of crude oil, refining, transportation, and marketing costs, oil company margins, and taxes.

According to Al Ghais, revenues generated from oil sales are often reinvested by oil-producing countries into the oil sector.

He stated that OPEC member countries reinvested a substantial portion of their revenue into exploration, production, and transportation projects.

That reinvestment, he said, ensured the continuous supply of oil to meet global demands.

On the other hand, the OPEC boss noted that consuming countries’ governments received significant revenue from taxes imposed on petroleum products.

In 2023, the Organisation of Economic Co-operation and Development’s average share of total tax on the final retail price increased year-on-year and amounted to approximately 44 per cent.

In some European countries, taxes represented more than 50 per cent of the final retail price, it was disclosed.

According to Al Ghais, the United Kingdom Office for Budget Responsibility revealed that fuel duties were expected to raise £24.7bn from 2023 to 2024, representing 2.2 per cent of all receipts and is equivalent to £850 per household and 0.9 per cent of national income.

“Therefore, for many consumers, taxation can be a more significant factor than the original price for crude, in feeling any pinch in their pocket at the pump,” he stated.

He explained that from 2019 to 2023, OECD economies earned approximately $1.915tn more per year from retail sales of petroleum products than OPEC countries made from oil revenues.

He noted that this significant revenue stream was largely due to taxation.

Al Ghais emphasised that oil-producing countries do not have the luxury of spending all their revenues on social, economic, and infrastructural development. Instead, they must reinvest in the oil sector to secure current and future supplies.

“It is obviously a sovereign right for countries and governments to develop their own taxation systems, but when there is talk of concerns about the effect of high pump prices on the disposable income of populations, it is important to remember how much of this is from taxes flowing to finance ministries around the world.

“What these taxation levels underscore, is that the revenue-generating potential of petroleum and petroleum products is recognised by producers and consumers alike.

“On a final note, some governments simultaneously seek to utilise the revenue-generating potential of petroleum, while seeking to phase out oil, alongside subsidising other energies. In advocating this approach, they should consider the question of how they will replace the revenues lost from taxation on oil. Might similar taxation levels need to be placed on other energies?” he asked.