Nigeria's recent fuel price increase has triggered widespread concern, with many blaming domestic operators, particularly the Dangote Refinery. However, Haitham Al Ghais, Secretary-General of the Organization of Petroleum Exporting Countries (OPEC), has clarified that the primary driver of high fuel prices is government-imposed taxes, particularly in major oil-consuming nations.
In a recent publication, Al Ghais explained that crude oil and its derivatives are vital to global industries, powering sectors from transportation to pharmaceuticals. Contrary to popular belief, he emphasized that rising oil prices do not predominantly benefit oil producers. “Revenues are generated, but they predominantly go to major oil-consuming countries through taxation,” he stated.
Al Ghais highlighted that OECD (Organisation for Economic Co-operation and Development) countries have earned significantly more from retail fuel sales than OPEC nations from crude oil sales. Between 2019 and 2023, OECD nations earned approximately $1.915 trillion more annually from petroleum products compared to OPEC countries. In 2023, taxes accounted for around 44% of the retail price of petroleum products in OECD countries, with some European nations exceeding 50%.
For Nigerian consumers, this underscores that high fuel costs are not solely tied to crude oil prices or refinery margins; a substantial portion is attributable to government taxes. “The price paid at the pump is influenced by various factors, including crude oil prices, refining, transportation, and taxes,” Al Ghais noted.
In the UK, for example, fuel duties are projected to generate £24.7 billion in revenue for the government during 2023-24, comprising 2.2% of total government receipts. This reflects a global trend where governments, both in oil-producing and consuming countries, heavily rely on taxes for revenue from petroleum products.
Al Ghais also pointed out that while oil-producing nations do earn revenue from oil sales, much of it is reinvested into exploration, production, and infrastructure to ensure a steady supply for global consumers. This reinvestment is crucial for maintaining future oil availability and stabilizing energy markets.
“While taxes are essential for funding public services and infrastructure, they also make up a significant part of the price consumers pay for fuel,” he added.
