Petrostates Will Never Again Get $1 Trillion In Oil And Gas Tax Revenue

Total global revenues from oil and gas taxes are set to approach the $1-trillion mark in 2021, but unlike in pre-COVID times, the world will never again see such high revenues from oil and gas, Rystad Energy said in an analysis on Wednesday.

Before the 2020 crisis, all the countries with oil and gas resources would typically receive a combined more than $1 trillion in oil and gas taxes. Last year, however, due to the lower production and low commodity prices, total government income from oil and gas taxes slumped to as low as $560 billion—a multi-year low, according to Rystad Energy’s estimates.

Thanks to higher oil prices, this year will be the last year in which governments’ revenues from oil and gas would come anywhere close to the $1-trillion mark, at $975 billion as estimated by the independent energy research firm.

Over the next years and decades, revenues will not reach that threshold ever again as the energy transition accelerates, Rystad Energy said.

From 2022 onwards, tax revenues will be limited to the low $800 billion range this decade. Then they are expected to tick up in the early 2030s to about $900 billion, “before starting their final and uninterrupted decline to as low as $580 billion in 2040 and about $350 billion in 2050,” Rystad Energy noted.

Unsurprisingly, the most to lose will be the countries that are highly dependent on tax revenues from oil and gas, including some of the largest OPEC producers such as Saudi Arabia, Iraq, Kuwait, Libya, and Algeria, according to the energy research firm.

“As the energy transition ramps up, countries highly dependent on tax revenue from the upstream industry may have no other option than to diversify their economy to sustain state budgets. This is clearly the rational course for them to follow, but there are inherent challenges in the form of insufficient economic and legal institutions, infrastructure and human capital,” Espen Erlingsen, head of upstream research at Rystad Energy, said.

For the world’s top oil exporter, Saudi Arabia—whose total tax income from oil and gas made up 27 percent of gross domestic product (GDP) in 2019, about half of the government take is at risk towards 2050—according to Rystad Energy.  

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

• Oil Rises After ‘Cataclysmic’ Boardroom Showdown
  
• Moody’s: Credit Risk Is Growing For Big Oil
  
• Activist Investor Wins Exxon Board Seats In Day Of Reckoning For Big Oil