The recent increase in fuel prices in Nigeria has raised concerns among the public, with some expressing their apprehension towards oil producers, especially local companies such as Dangote Refinery.
Nevertheless, OPEC Secretary General, Haitham Al Ghais, has clarified the situation, respectfully explaining that the actual causes of high fuel prices are different—mainly due to taxes levied by governments, including those of major oil-consuming nations.
In an article released on Tuesday, Al Ghais elucidated that crude oil and its derivatives constitute the foundation of global industries, serving as the driving force behind various sectors, including transportation and pharmaceuticals.
It is a common misconception that rising oil prices directly benefit oil producers at the expense of consumers. However, the head of OPEC has refuted this notion, emphasizing that oil-producing nations are not the primary beneficiaries of retail fuel sales.
“Revenue generation is prevalent, but the primary source of earnings for major oil-consuming nations is taxation,” Al Ghais noted. The Secretary-General underscored that OECD (Organization for Economic Cooperation and Development) countries derive significantly higher revenues from the retail sale of petroleum products compared to OPEC member countries’ earnings from crude oil sales.
Between the years of 2019 and 2023, OECD nations annually earned approximately $1.915 trillion more than OPEC nations from petroleum products. In 2023 alone, taxes accounted for approximately 44% of the final retail price of petroleum products in OECD countries, and in certain European countries, this figure exceeded 50%.
For Nigerian consumers, it is crucial to understand that the elevated fuel prices at the pump are not solely influenced by crude oil prices or refinery margins. A substantial component of the cost borne by consumers is attributed to government taxes. It is essential to acknowledge that the price paid by consumers at the pump is determined by various factors, including crude oil prices, refining, transportation, and, significantly, taxes, as emphasized by Al Ghais.
In the United Kingdom, for example, fuel duties are projected to generate £24.7 billion in revenue for the government in the fiscal year 2023-24, representing approximately 2.2% of total receipts. These figures exemplify the global trend among governments, both in producing and consuming nations, to leverage petroleum products as a means of revenue generation.
Al Ghais emphasized that although oil-producing nations generate income from oil sales, a substantial portion is reinvested in exploration, production, and infrastructure projects. This reinvestment is essential to sustain future oil supplies and ensure the stability of global energy markets.
In the end, taxes are important for the government to provide services and build stuff, but they also make up a big chunk of the money we pay for gas.
The OPEC Secretary General advocated for a paradigm shift, urging a move away from the divisive narrative that positions consumers and producers as adversaries. He underscored the shared interest of both parties as stakeholders within the energy ecosystem.
The fuel price wahala in Nigeria right now is a clear example of how taxes, not the oil companies, are the main reason why we pay so much for fuel.
