OPEC lists reasons for fuel price increase, gives simple solutions

• Rather than oil prices, OPEC has said that major oil-consuming nations' taxes mostly dictate fuel costs
• The organisation said that the cost of crude oil, the expenses associated with refining and others are what affect costs
• According to Al Ghais, countries that produce oil often reinvest the proceeds from oil sales back into the oil sector

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

Haitham Al Ghais, the Secretary General of the Organization of Petroleum Exporting Countries, has said fuel costs are mostly determined by taxes imposed by major oil-consuming countries rather than oil prices.

OPEC stated that countries that produce oil usually use the proceeds from oil sales to fund the oil sector again. Photo Credit: Mascot
Source: Getty Images

He clarified that the price consumers pay at the pump is influenced by a number of factors, such as the cost of crude oil, the expenses associated with refining, transportation, and marketing, as well as taxes and oil company margins.

Al Ghais claimed that nations that produce oil frequently reinvest the money they receive from oil sales back into the oil industry.

He said that exploration, production, and transportation projects received a large percentage of the revenue from OPEC member countries.

The OPEC secretary also claimed that this reinvestment guaranteed a steady flow of oil to meet demand throughout the world, the Punch reported.

Taxes on petroleum products

The head of OPEC pointed out that taxes on petroleum products brings in a substantial amount of money for the governments of the consuming nations.

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.

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.

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.

“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 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 was primarily responsible for this significant source of income.

Al Ghais underlined 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. To ensure both present and future supplies, they must instead reinvest in the oil industry.

“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.

Dangote petrol prices emerge

Legit.ng reported that the Nigerian National Petroleum Corporation Limited (NNPCL) has started lifting Premium Motor Spirit (PMS), also known as petrol, from Dangote Refinery today, Sunday, 15 September 2024.

On Saturday, the national oil company announced that at least 300 trucks are stationed at the Lekki, Lagos refinery.

The news has been greeted with excitement by Nigerians who hope that development will mean cheaper petrol prices at filling stations. This seems to have been granted.

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Source: Legit.ng