OPEC‘s Secretary General, Haitham Al Ghais, has stated that taxes, not oil prices, are the main reason for high fuel costs. He explained that the price consumers pay at the gas station is influenced by several factors, including the cost of crude oil, refining, transportation, marketing, company profits, and taxes.
Al Ghais pointed out that oil-producing countries often put their oil sales revenue back into the oil industry. He said that OPEC members invest a significant part of their earnings into exploration, production, and transportation to ensure a steady supply of oil to meet global needs.
However, he also noted that governments in oil-consuming countries collect a lot of money from taxes on petroleum products. In 2023, the average tax on fuel in the Organisation for Economic Co-operation and Development (OECD) countries made up about 44% of the total price at the pump. In some European nations, taxes account for over 50% of the final retail price.
According to Al Ghais, the UK’s Office for Budget Responsibility expects fuel duties to generate £24.7 billion from 2023 to 2024, which is 2.2% of all government receipts. This equates to about £850 per household and 0.9% of the national income.
He emphasized that for many consumers, taxes can have a bigger impact on their wallets than the base price of crude oil. From 2019 to 2023, OECD countries made about $1.915 trillion more per year from selling petroleum products at retail than OPEC countries made from oil revenues. This significant income is largely due to taxes.
Al Ghais stressed that oil-producing nations must reinvest in the oil sector to maintain current and future supplies, rather than spending all their revenue on social, economic, and infrastructure development.
He acknowledged that it is the sovereign right of countries to set their own tax systems. However, when discussing the impact of high fuel prices on people’s spending power, it’s important to consider the taxes that go to government treasuries worldwide.
Al Ghais also questioned the approach of some governments that aim to use the revenue from petroleum while phasing out oil and subsidizing other energy sources. He asked how these governments plan to replace the lost oil tax revenue and whether similar tax levels might be needed for other energy sources.