Who gets what from imported oil?

Oil is always big news. Every increase in its price is thought to raise fuel costs to the detriment of consumers while generating huge income for foreign oil producers — such as OPEC Member Countries.

But this is a misconception. While huge revenues are indeed generated, they are earned primarily by  major oil consuming countries. OECD economies, for example, earn far more revenue from the retail sale of petroleum products than OPEC countries make from the original sale of their oil.

From 2010 to 2015, OECD economies earned on average about $1,381 billion/year more from retail sales of petroleum products than OPEC Countries made from oil revenues. A significant amount of the final retail prices of petroleum products is attributed to high taxation rates. In fact, during 2015, the share of total tax of the final retail price amounted to more than 50%.

Therefore, the real burden on consumers comes from taxes, not from the original price paid for crude oil. Moreover, between 2010 and 2015, OECD nations earned on average $1,076 bn/y from taxes alone compared to OPEC’s $944 bn/y in oil revenues. And while the billions of dollars earned from oil taxes are pure income for OECD governments, oil export revenues of OPEC Countries must also cover the high costs of exploration, production and transportation.

Taxes on oil

In a comparison of a composite barrel of oil between 2013 and 2015 in the OECD, crude oil prices plummeted by 34%, while taxes increased by 12%. The result is that producers lost revenue while industry saw increased profits and consumer governments benefited from a boost in income generated from the increase in oil taxes.

So the next time you hear that the price of a barrel of oil is having an impact on the price you pay at the pump, remember that oil-related taxes are imposed by many governments who ultimately are often the biggest beneficiaries.