OPEC Chief Highlights Taxes as Major Factor in Fuel Prices

KEY POINTS

• Haitham Al Ghais claims taxes, not oil prices, heavily influence fuel prices.
• OECD countries see up to 50% of fuel prices driven by taxes.
• OPEC nations reinvest oil revenue into the industry to ensure stable supply.

Haitham Al Ghais, Secretary General of the Organization of Petroleum Exporting Countries has stated that the main factor influencing fuel prices is not oil prices but rather levies levied by major oil-consuming nations. 

He clarified that a number of factors, such as the cost of crude oil, the expenses associated with refining, marketing, shipping, and oil firm margins, all influenced the prices that customers paid at the pump.

Oil-producing nations reinvest oil sales earnings

Al Ghais claims that oil-producing nations frequently spend their earnings from oil sales back into the oil industry. 

Adding that, “a significant amount of the money earned by OPEC members was reinvested in transportation, production, and exploration initiatives.”

He further said that by reinvesting, the oil supply will remain steady to meet demand worldwide. 

However, the head of OPEC pointed out that taxes on petroleum goods brought in a substantial amount of money for the governments of the consuming nations.

Taxes on petroleum goods generate significant revenue

The average percentage of total tax on the final retail price that went to the Organization for Economic Co-operation and Development climbed year over year to about 44% in 2023.

It was revealed that taxes accounted for almost 50% of the final retail price in many European countries.

Al Ghais reports that the UK Office for Budget Responsibility stated that gasoline charges were projected to generate £24.7 billion between 2023 and 2024, or 2.2% of total collections, or £850 per household and 0.9% of the country’s income. 

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

He clarified that between 2019 and 2023, retail sales of petroleum goods generated roughly $1.915 trillion in revenue for OECD economies, while oil earnings for OPEC countries accounted for the remaining portion.

He pointed out that taxes were primarily responsible for this significant source of income.

The need for strategic reinvestment

According to a report by Punch, Al Ghais emphasized that nations that produce oil do not have the luxury of allocating all of their income to the advancement of their economies, societies, and infrastructure.

Rather, to ensure both present and future supplies, they need to reinvest in the oil industry. 

While it is undoubtedly a sovereign right for nations and governments to design their own taxation structures, it is crucial to keep in mind that a large portion of the concern regarding the impact of high gas prices on people’s disposable income comes from taxes that fund international ministries.

“What these tax rates highlight is that both producers and consumers recognize the potential of petroleum and petroleum products to generate cash.”

“To sum up, some governments want to phase out oil use while also utilizing its potential to generate cash and subsidizing alternative energy sources.”

“They ought to think about how they will make up the money they lost from taxing oil while promoting this strategy. Is it necessary to impose comparable taxation levels on other energies? “, he inquired.