With the summer driving season approaching, US gasoline pump prices have gotten a head start on their expected increase. And the Organization of Petroleum Exporting Countries doesn't want to take the blame for the rising fuel prices this time around.
Gasoline prices generally move with those of crude oil. From that it is easy to see why pump prices have increased in the past month. Heightening tensions in the Middle East following the release of data suggesting that economic recovery in the US is imminent pushed the near-month crude futures price on the New York Mercantile Exchange above $27 at presstime last week.
The US average price for all types of gasoline increased 3¢/gal in the final week of March to average $1.41/gal. This is still 7¢ below the year-ago price, says the American Petroleum Institute.
API also reports that, in inflation-adjusted terms, today's motor gasoline prices are nearly half of the 1981 record high of $2.64/gal. Lower manufacturing, distribution, and marketing costs-in addition to lower crude costs-are the reasons for this. But in the interim, taxes have increased.
Currently, total taxes collected on 1 gal of gasoline in the US amount to 42¢, including 18.4¢/gal in federal taxes and 23.6¢/gal in volume-weighted average state taxes. When real pump prices reached their high in 1981, both taxes combined totaled 28¢/gallon.
Motor fuel tax comparisons
In conjunction with its Panorama 2002 symposium in February, the Institut Français du Pétrole (IFP) released a report on worldwide motor fuel taxation.
The report notes that, in general, oil-consuming countries that produce little or no oil apply the highest tax rates on fuel, while those countries that produce oil apply the lowest taxes on motor fuel.
During 1996-2000, the report states, the G7 countries, which comprise the US, Canada, Japan, France, Germany, Italy, and the UK, collected an average of $270 billion/year by taxing petroleum products. During the same period, oil revenues for OPEC countries averaged $170 billion/year.
The authors of this report, Jean-Pierre Favennec and Sandra Rechignac, say that this comparison explains OPEC's position that it no longer wants to be held responsible by the media, politicians, or public opinion for the rise in prices at the pump.
Gasoline taxes represent only 12% of the pump price in Nigeria, 30% in Brazil, and 41% in Venezuela; but the biggest exceptions to the rule that producing countries are generally easier on taxes are the UK-which levies an 80% tax on motor fuels-and Norway, with a 73% tax. These, however, are also major consuming countries.
Total taxes on gasoline in the US are among the lowest. The highest tax rates are levied in Western Europe among the smaller producers of oil. The tax rate on motor fuel is 80% in France, 75% in Germany, and 74% in Italy. Taxes on gasoline in Japan represent 55% of the final selling price, but the government imposes an additional 5% tax on crude oil consumption.
Fuel taxes: substantial revenue
In many major consuming countries, taxes generate substantial revenue. In 2000, the French government collected 164 billion francs as a result of the domestic tax on oil products, according to the IFP report. Whereas 80% of the final price of gasoline is allocated to taxes in Western Europe, payments made to producing countries amount to 10% of the pump price.
OPEC contends that the high taxes discourage consumption of oil products, thereby reducing the revenue of oil exporting countries. To counter this argument, consumer countries assert that tax revenue must compensate for environmental damage caused by using petroleum products. Taxes are a means to avoid excess consumption and a concomitant increase in pollution.
In conclusion, Favennec and Rechignac note an essential difference between the revenue earned by OPEC and that collected in the form of taxes by consumer countries. While OPEC's earnings can be regarded as the rent of a producer whose low price is paid by the consumer, taxes are a form of revenue for which the payer will receive public services in return. Therefore, say the authors, these two elements cannot be compared.
