Vienna, September 19, 2024
Haitham Al Ghais, Secretary General of the Organisation of Petroleum Exporting Countries (OPEC), has revealed that taxes levied by major oil-consuming nations, rather than fluctuations in oil prices, are the primary factor influencing fuel costs at the pump.
Speaking to journalists, Al Ghais detailed that while crude oil prices play a role in determining fuel costs, several other factors contribute to the final price consumers pay. These include refining, transportation, and marketing costs, oil company margins, and most notably, taxes imposed by governments.
Al Ghais explained that oil-producing countries typically reinvest a significant portion of their revenue into the oil sector. This reinvestment supports exploration, production, and transportation projects, ensuring a steady supply of oil to meet global demand. In contrast, governments of oil-consuming nations derive substantial revenue from taxes on petroleum products.
In 2023, the average tax share of the final retail price for petroleum products in Organisation of Economic Co-operation and Development (OECD) countries rose to approximately 44 percent, with some European nations seeing taxes represent over 50 percent of the retail price. The UK’s Office for Budget Responsibility reported that fuel duties were projected to raise £24.7 billion from 2023 to 2024, making up 2.2 percent of all receipts and equivalent to £850 per household, or 0.9 percent of national income.
Al Ghais pointed out that for many consumers, taxes can have a more pronounced effect on fuel prices than the cost of crude oil itself. He highlighted that from 2019 to 2023, OECD countries earned about $1.915 trillion more annually from retail petroleum sales compared to the revenue earned by OPEC countries from oil.
The OPEC Secretary General stressed that oil-producing nations must prioritize reinvestment in the oil sector over spending on social and infrastructural development to secure future supplies. He also addressed the issue of taxation in the context of energy transition policies, questioning how governments will compensate for revenue lost from oil taxation if they phase out oil and subsidize alternative energies.
“It is a sovereign right for countries to develop their own taxation systems,” Al Ghais noted. “However, when discussing the impact of high pump prices on disposable incomes, it is crucial to consider the substantial role of taxes in these costs. As governments explore alternative energy sources and adjust their policies, they must also address the potential revenue gaps created by shifting taxation away from oil.”