OPEC Chief Clarifies the Real Reasons Behind Fuel Price Hikes

Nigeria’s recent fuel price hike has stirred concerns, with many placing the blame on oil producers, especially local operators like Dangote Refinery. However, OPEC Secretary General Haitham Al Ghais has offered a different perspective, emphasizing that the true cause of high fuel prices lies primarily in government-imposed taxes, not oil producers.

In an article published on Tuesday, Al Ghais highlighted that crude oil and its derivatives form the backbone of global industries, from transportation to pharmaceuticals. He pointed out that the assumption that rising oil prices solely benefit producers at the expense of consumers is a myth.

“Revenues are often generated, but they are predominantly earned by major oil-consuming countries through taxation,” Al Ghais noted. He stressed that nations within the Organisation for Economic Co-operation and Development (OECD) earn far more from the retail sale of petroleum products than OPEC member countries make from selling crude oil.

Between 2019 and 2023, OECD countries earned approximately $1.915 trillion more annually than OPEC nations from petroleum products. In 2023 alone, taxes accounted for about 44% of the final retail price of petroleum products in OECD countries, with certain European nations seeing that figure exceed 50%.

For Nigerian consumers, Al Ghais’ remarks underscore that high fuel prices are not simply due to crude oil costs or refinery margins. Instead, a large portion of the price is attributed to government taxes. “It is important to recognize that the price paid by consumers at the pump is determined by multiple factors, including crude oil prices, refining, transportation, and, notably, taxes,” Al Ghais explained.

In the UK, for example, fuel duties are expected to generate £24.7 billion for the government in 2023-24, representing 2.2% of all receipts. This trend reflects the global pattern of governments, both in producing and consuming nations, using petroleum products as a significant source of revenue.

Al Ghais also emphasized that while oil-producing nations do earn from oil sales, much of that revenue is reinvested into exploration, production, and infrastructure to ensure a steady supply for consumers worldwide. This reinvestment is crucial for maintaining future oil supplies and stabilizing global energy markets.

In conclusion, Al Ghais urged a move away from the narrative that pits consumers against producers, stressing that both are stakeholders in the energy ecosystem. The ongoing fuel price crisis in Nigeria serves as a reminder of the complexity behind fuel pricing, where taxes, not oil producers, are largely responsible for what Nigerians pay at the pump.