São Paulo – Countries that consume oil generate greater revenues from taxes on sales of oil products than producer nations can generate with exports of crude oil. Oil producer nations should seek other sources of revenues and reduce dependence on foreign sales of the commodity. The evaluation is by Abdallah El-Badri, secretary general of the Organization of the Petroleum Exporting Countries (Opec), which participated on Monday (28) in a conference in London.
“For example, over the 2007-11 period OPEC Member Countries received close to US$ 4.2 trillion in revenues generated from crude oil sales. But over the same timeframe, OECD (Organisation for Economic Co-operation and Development) countries received over US$ 5.5 trillion from oil taxes,” said Badri, according to a press statement disclosed by the institution.
The secretary general pointed out that funds originating from taxes levied on oil by the countries of the OECD are received as net income by the governments of those countries, while revenues by the countries of the Opec with sales of crude oil are partly used to cover the high cost of exploration, production and transport.
Badri stated that the Opec does not forecast a collapse in oil prices in coming years, but estimates that a reduction in revenues from producer countries could have a strong impact on the economies of these nations. He pointed out that, in 2011, over 75% of total revenues of exports from member countries of the organisation came from the commodity and that it also represents the central force for financing of health, education and infrastructure of these nations.
“I should add that some OPEC Member Countries recognize the importance of reducing their dependency on oil exports. I believe it is becoming increasingly crucial for oil producers who still depend heavily on oil revenues to look to other sources of income. Diversity, in this regard, is vital,” he pointed out.
Pointing out how the producer countries end up reinvesting their oil export revenues, the executive stressed the new projects of members of the Opec. “According to the latest list of upstream projects in the OPEC Secretariat’s database, Member Countries are undertaking or planning around 116 development projects during the five-year period 2012-2016. It is estimated, that total OPEC liquids capacity will rise by 5 million barrels a day over this period. And these developments correspond to an estimated investment of about $270 billion.”
He warned that a reduction in oil prices and revenues would not only affect the member countries of the Opec. “It will mean less recycling of Opec Member Country income globally. And it has the potential to impact the entire oil market if low prices lead to investments across the world being put on hold or cancelled altogether,” he said.
“In fact, this is true for all energies,” he explained. “Every energy, and every investment project, has a break-even cost associated with it. Whether producing Canadian oil sands, US tight oil or ultra-deep offshore, there is an associated marginal cost. If prices fall below a certain level, then the industry will find some of these developments are no longer viable. And it is clear that lower oil prices would also impact the development of other projects such as renewables,” he pointed out.
On ending his address, Badri pointed out the need for stability in all sectors of the production and consumer chain to guarantee market stability. “Stability for producers to allow them to earn a fair return from the exploitation of their exhaustible natural resources; stability for economies around the world so that they may grow; and stability for investments and expansion to flourish. It is the best means of safeguarding all of our interests,” he finished off.
*Translated by Mark Ament
