I'm not sure what you mean by the west doesn't tax oil. Just off the top of my head, oil is subject to the following taxes:
* Consumer purchases of the final products of oil are heavily taxed (especially in Europe).
* Oil companies pay significant income tax. Exxon alone paid over $5.5B, or about 25% of net profit, in taxes last year, while in 2013 they paid closer to 42%. [1]
* After they pay income tax, their dividends are taxes again.
I'm sure there are other invisible taxes throughout the production and rights-acquisition process.
[1]: https://finance.yahoo.com/q/is?s=XOM+Income+Statement&annual