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Laying blame for the oil price rise

THE hysteria dominating the minds of most consumers seems to be related to petrol prices and the role of the OPEC cartel in determining these prices.

The cartel is a permanent inter-governmental organisation, created at the Baghdad Conference of 1960.

The original OPEC members, Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, were joined later by Qatar, Indonesia, Libya, United Arab Emirates, Algeria, Nigeria, Ecuador and Gabon.

In November 1989 the OPEC countries agreed to a pricing and production agreement.

By cutting back production the member countries were able to influence the price of the barrel of oil. The minimum reference price of an OPEC crude basket was set at $21 per barrel.

There have been many other agreements and treaties by OPEC to manipulate the price of the barrel of oil by holding back production.

The most recent agreement appears to have been embraced by all nations.

The OPEC website at http://www.opec.org has a section “Why you pay so much for gasoline and other oil products” where it says that it is an “incorrect assumption that the organisation is responsible for high product prices … OPEC is not directly responsible for high gasoline or heating oil prices … the main reason can be summed up in one word – taxes”.

The website said that the European Union had one of the highest levels of tax with 68 per cent.

Only 16 per cent went to the refiners and 16 per cent to the oil exporters.

The G7 countries take 49 per cent of the price in taxes, 26 per cent goes to marketers and 25 per cent to the oil exporters.

The OECD nations skim 48 per cent of the final price in taxes and refiners and marketers take 30 per cent, with the final 22 per cent going to oil exporters.

So what is the situation in Australia? A general view is that about 50 per cent of the final prices in Australia are taxes imposed by Federal governments.

The retailers and refiners aren’t the major beneficiaries of the recent price hikes.

The Federal Government seems to be profiteering substantially from the recent price rises.

It is very easy for the Federal Government to address this issue. It simply has to reduce the excise. In addition it needs to drop the indexation of the excise as that creates a system that feeds into itself constantly.

By linking the level of the excise to the CPI, every time the price of fuel rises that creates an increase in the CPI, which then flows through to a further rise in excise that then flows back to the CPI

A vicious circle of price rises and the impact of that is to cause all goods that are subject to transportation to rise in price.

It is now time for Mr Howard to act to maintain his pre-election promise that fuel prices would not rise.

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