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The cost of domestic energy prices to Saudi Arabia

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  • Alyousef, Yousef
  • Stevens, Paul

Abstract

The issue of subsidies on domestic energy prices has moved up the policy agenda, most recently as a result of the G20 commitment in September 2009 to phase out such subsidies. However, what constitutes a “subsidy” is complex and controversial. The IEA in its last World Energy Outlook claimed that Saudi Arabia was second in the world in terms of its levels of subsidy on domestic energy prices. However, because Saudi Arabia is a price maker in the international oil market, the methodology used by the IEA is seriously flawed. This paper explains the problems with the methodology for computing subsidies and explains the correct method in the case of Saudi Arabia. It then attempts to measure the levels of subsidy in Saudi Arabia using this methodology. However, while it converts the IEA's “subsidy” of $23 billion into a net “profit” of $5.7 billion, it goes on to point out that the current low price regime is causing problems for Saudi Arabia.

Suggested Citation

  • Alyousef, Yousef & Stevens, Paul, 2011. "The cost of domestic energy prices to Saudi Arabia," Energy Policy, Elsevier, vol. 39(11), pages 6900-6905.
    • Handle: RePEc:eee:enepol:v:39:y:2011:i:11:p:6900-6905
    DOI: 10.1016/j.enpol.2011.08.025
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    References listed on IDEAS

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    1. Munasinghe,Mohan & Meier,Peter, 1993. "Energy Policy Analysis and Modelling," Cambridge Books, Cambridge University Press, number 9780521363266.
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    Cited by:

    1. Groissböck, Markus & Pickl, Matthias J., 2018. "Fuel-price reform to achieve climate and energy policy goals in Saudi Arabia: A multiple-scenario analysis," Utilities Policy, Elsevier, vol. 50(C), pages 1-12.
    2. Al-Maamary, Hilal M.S. & Kazem, Hussein A. & Chaichan, Miqdam T., 2017. "The impact of oil price fluctuations on common renewable energies in GCC countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 75(C), pages 989-1007.
    3. Makridou, Georgia & Andriosopoulos, Kostas & Doumpos, Michael & Zopounidis, Constantin, 2016. "Measuring the efficiency of energy-intensive industries across European countries," Energy Policy, Elsevier, vol. 88(C), pages 573-583.
    4. Soummane, Salaheddine & Ghersi, Frédéric & Lefèvre, Julien, 2019. "Macroeconomic pathways of the Saudi economy: The challenge of global mitigation action versus the opportunity of national energy reforms," Energy Policy, Elsevier, vol. 130(C), pages 263-282.
    5. Jorge Blazquez, Lester C Hunt, and Baltasar Manzano, 2017. "Oil Subsidies and Renewable Energy in Saudi Arabia: A General Equilibrium Approach," The Energy Journal, International Association for Energy Economics, vol. 0(KAPSARC S).
    6. Mezghani, Imed & Ben Haddad, Hedi, 2017. "Energy consumption and economic growth: An empirical study of the electricity consumption in Saudi Arabia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 75(C), pages 145-156.
    7. Hasanov, Fakhri J. & Shannak, Sa'd, 2020. "Electricity incentives for agriculture in Saudi Arabia. Is that relevant to remove them?," Energy Policy, Elsevier, vol. 144(C).
    8. Casey B. Mulligan, 2023. "Beyond Pigou: externalities and civil society in the supply–demand framework," Public Choice, Springer, vol. 196(1), pages 1-18, July.
    9. Aldossary, Naief A. & Rezgui, Yacine & Kwan, Alan, 2015. "Consensus-based low carbon domestic design framework for sustainable homes," Renewable and Sustainable Energy Reviews, Elsevier, vol. 51(C), pages 417-432.
    10. Gasim, Anwar A. & Agnolucci, Paolo & Ekins, Paul & De Lipsis, Vincenzo, 2023. "Modeling final energy demand and the impacts of energy price reform in Saudi Arabia," Energy Economics, Elsevier, vol. 120(C).
    11. Groissböck, Markus & Pickl, Matthias J., 2016. "An analysis of the power market in Saudi Arabia: Retrospective cost and environmental optimization," Applied Energy, Elsevier, vol. 165(C), pages 548-558.
    12. Alshammari, Yousef M. & Sarathy, S. Mani, 2017. "Achieving 80% greenhouse gas reduction target in Saudi Arabia under low and medium oil prices," Energy Policy, Elsevier, vol. 101(C), pages 502-511.

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