The world’s real petro-pirates!

This week's column is dedicated to those meetings up in Seattle this week.

When, as a citizen of an oil producing country, Venezuela, I see oil being valued by the market at US$ 150, and we only receive about US$ 20, I believe that I have the right to feel a bit let down by all those who promised us a rose garden if we duly signed up on all the international commercial agreements peddled by GATT; and lately by the World Trade Organization WTO. What do I mean? 

From one barrel of oil, one can approximately and simultaneously obtain 84 liters of gasoline, 12 of jet fuel, 36 of gas oil, 16 of lubricants and 12 of heavy residues. 

In Britain today, educated consumers are paying (voluntarily and out of their own pockets) US$ 1.38 per liter of gasoline (sorry, petrol) using the traditional way of establishing a product's value. 

Even if we just consider the gasoline, we obtain a value of about US$ 116 per barrel of oil and then by adding the rest of the products, we should be close to US$ 150 since refining and distribution costs are fairly small. 

I am well aware that the value US$ 150 is achieved by the taxman forcing himself in at the point of sale of gasoline, as an extremely expensive middleman, keeping 85% of the gross. But, was this not exactly the things that world governments agreed not to do, in order to foster free trade and growth ... and that which we believed when we signed up on all those reductions of protectionist duties, accepting to lend the developed world a hand, collecting, their pretensions of royalties for intellectual property rights? 

Today's result is therefore that, when an oil producing country is selling it's non-renewable and scarce resource to the world, it's only getting a fraction of the real value. 

The hurt and pain I feel at seeing so much poverty in my country, that could be alleviated by just a little bit more of justice by the developed consumer countries themselves, is made worse by thus adding salt to the wound.

Their bankers sold us on the idea, in the mid-seventies, that oil was going to increase in value, and therefore that we could calmly take on the responsibility for servicing a huge country debt ... they never told us that all the increase in the value of oil, which has actually occurred since then, was going to be confiscated by their taxmen.

We producers were, and still are, the remaining scapegoat for all inflationary pressures derived from any price increase in gasoline and other derivatives ... even when these were just the result of higher taxes.

We oil producers were, and still are, branded as the most wanted criminal in environmental issues when, in fact, we are the ones paying 100% of the cost of all the protection plans that through their taxes reduce world demand for oil.

Today we hear of even higher future oil taxes when Germany (for example) announces a plan of annual increases as a way to reduce their workers' social security payments and discriminate against us by not taxing coal and other energy sources.

For what it's worth, I would like to remind the developed world in good conscience that, when you're giving generous assistance to the under-developed world, much of it is with money properly belonging to the oil producing nations. 

When I see the suffering of my more destitute fellow countrymen, I blame myself, I blame all those lousy governments we have had ... but I also rightly blame the taxmen in the consumer countries, who are the true petro-pirates of the world.

http://petropolitan.blogspot.com/1999/12/worlds-real-petro-pirates.html

Seeking allies against oil taxes

In Europe, as well as in many other parts of the world, the price of gasoline is somewhere around US$ 1.25 per liter (Bs. 750 at current exchange rates). This is five times what a liter goes for at gasoline stations in the United States. This sky-high price is the simple result of applying what effectively is a commercial duty and which I have roughly calculated at about 800%. 

This duty, basically imposed by means of a gasoline tax, is the main reason oil producers today are obtaining such poor results. The 800% duty, besides naturally reducing demand for oil, also generates a totally unjust distribution of income. The producer of the very valuable and non-renewable resource of oil receives less than 10% of what the consumer pays at the pump.

It might only get worse. A European government recently announced a fiscal policy that implies raising these taxes on gasoline by 6% over annual inflation, thereby effectively duplicating them by the year 2007. There is no doubt in my mind as to the danger this implies for countries such as ours. How much more will demand be depressed if the plan is to charge US$ 2.50 per liter?

It is evident that the degree of development of a country is to a great extent a function of how they defend their own interests. As an example today we observe the United States threatening to impose duties of 100% on Europe as a result of a dispute over bananas, a fruit neither one of them cultivates. In this sense, and faced with the surprising silence both of our own oil industry as well as of the rest of the world, I will try do my part by a small campaign aimed at informing the public in general about this abusive tax-duty on gasoline.

What can be done? The answer to this question should be, before anything else, to inform. It is very probable that many of the affected parties that today are unaware of this problem could, once properly informed, become powerful allies. The following comments are aimed at exactly that.

Today’s strategy of defending prices is based on production cuts, which requires a heavy dose of sacrifice for producing nations and creates divisions and disputes across the board. On the other hand, a well-aimed protest against elevated taxes on gasoline could serve to unify all oil producers, OPEC and non-OPEC.

In the United States there are a great many individuals, owners of oil wells, who would form a pressure group with much more power than shareholders of fruit companies once they understand that the main reason for their diminished royalties is the gasoline tax.

Likewise, we must analyze how and to what degree these high gasoline prices, caused by these high taxes, are putting the brakes on the growth of the global economy. A decrease in gasoline prices could have a very positive impact, for instance creating jobs in the service sector, where Europe clearly lags USA. 

We must also put to rest the fears of environmentalists. Our joint action is aimed at obtaining a just distribution of income, not to provoke irresponsible consumption. Also if it results in more economic growth and if adequately channeled, this could avoid ecological disasters of much greater impact than those that could result from a simple increase in gasoline consumption. Let us not forget that Chernobyl and fires in the Amazon are events very closely related to poverty.

Just simply raising the issue of gasoline taxes being duties in disguise allows us to redefine the relationships with a series of international entities. For example, one could question the bases on which entities such as the World Trade Organization leans heavily on Venezuela and other countries, to reduce their trade barriers while they simultaneously keep absolutely silent about the tariffs imposed on gasoline. 

In the same sense, we could question the International Monetary Fund’s recipe calling for the increase in gasoline prices and taxes. This is totally opposed to free and open markets, and in our case certainly helps to aggravate our balance of payment problems even further.

As always, I wish to make it perfectly clear that my position on this subject is not an effort to find an excuse for the deplorable economic situation we are going through in this country. That responsibility is ours, and only ours. Nonetheless, one of the aspects we must necessarily rectify is our miserable capacity to unite the nation behind a concerted effort to defend our interests.

If we don’t defend our oil, what else is there to defend?