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Petroleum Product Subsidies

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Author Info

  • John M. Piotrowski
  • David Coady
  • Justin Tyson
  • Rolando Ossowski
  • Robert Gillingham
  • Shamsuddin Tareq

Abstract

Petroleum product subsidies have again started to increase with the rebound in international prices. This note reviews recent developments in subsidy levels and argues that reforming the policy framework for setting petroleum product prices is necessary to reduce the fiscal burden of these subsidies and to address climate change. Between 2003 and mid-2008, global consumer subsidies for petroleum products are estimated to have increased more than eightfold, from $57 billion to $490 billion. Although subsidies decreased to $136 billion by mid-2009, they are projected to increase to $237 billion by end-2010 (or nearly 0.3 percent of global GDP). Tax-inclusive subsidies, reflecting sub-optimal taxation of petroleum products, are projected to increase to $733 billion, or 1.0 percent of global GDP. G-20 countries account for over 70 percent of tax-inclusive subsidies. Halving tax-inclusive subsidies could reduce projected fiscal deficits in subsidizing countries by one-sixth and greenhouse emissions by around 15 percent. Subsidy reform strategies should contain measures to mitigate the impact of higher prices on the poorest groups.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Staff Position Notes with number 2010/05.

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Length: 20
Date of creation: 25 Feb 2010
Date of revision:
Handle: RePEc:imf:imfspn:2010/05

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Related research

Keywords: Subsidies; Taxes; Commodity price fluctuations; Fiscal reforms; Governance; Oil exporting countries; Oil product prices; Oil subsidies; Price stabilization; Petroleum products; subsidy reform; pricing mechanism; petroleum product prices; price subsidies; petroleum prices; subsidizing; energy information administration; gas emissions; greenhouse gas; greenhouse gas emissions; consumer subsidies; fossil fuels; cash transfers; fuel prices; fossil fuel subsidies; petroleum product consumption; safety nets; oil-producing countries; oil exporters; petroleum consumption; oil prices; energy subsidies; universal subsidies; natural gas; oil importers; price subsidy; gasoline taxes; petroleum pricing; gasoline price; producer subsidy; fuel taxes; fuel source; vulnerable groups; petroleum product pricing; oil imports; safety net programs; food price subsidies; gas subsidies; oil producers; effective safety nets; liquefied petroleum gas; extractive industries; producer subsidies; crude prices; gasoline subsidies; food subsidy; gasoline prices; greenhouse gases; cash transfer program; environmental damage; higher oil prices; oil companies;

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Citations

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Cited by:
  1. repec:euv:dpaper:003 is not listed on IDEAS
  2. Kojima, Masami, 2013. "Petroleum product pricing and complementary policies: experience of 65 developing countries since 2009," Policy Research Working Paper Series 6396, The World Bank.
  3. Plante, Michael, 2011. "The long-run macroeconomic impacts of fuel subsidies in an oil-importing developing country," MPRA Paper 33823, University Library of Munich, Germany.
  4. World Bank, 2011. "Climate Change and Fiscal Policy : A Report for APEC," World Bank Other Operational Studies 2734, The World Bank.
  5. Benjamin Jones & Michael Keen & Jon Strand, 2013. "Fiscal implications of climate change," International Tax and Public Finance, Springer, vol. 20(1), pages 29-70, February.
  6. Charles E. McLure, Jr., 2013. "Reforming Subsidies for Fossil Fuel Consumption: Killing Several Birds with One Stone," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1312, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  7. Jaejoon Woo & Elva Bova & Tidiane Kinda & Yuanyan Sophia Zhang, 2013. "Distributional Consequences of Fiscal Consolidation and the Role of Fiscal Policy," IMF Working Papers 13/195, International Monetary Fund.
  8. Michael Plante, 2013. "The long–run macroeconomic impacts of fuel subsidies," Working Papers 1303, Federal Reserve Bank of Dallas.
  9. van Beers, Cees & Strand, Jon, 2013. "Political determinants of fossil fuel pricing," Policy Research Working Paper Series 6470, The World Bank.
  10. Wie, Jiegen & Wennlock, Magnus & Johansson, Daniel J.A. & Sterner, Thomas, 2011. "The Fossil Endgame: Strategic Oil Price Discrimination and Carbon Taxation," Discussion Papers dp-11-26, Resources For the Future.
  11. Ian W.H. Parry & Jon Strand, 2011. "International Fuel Tax Assessment," IMF Working Papers 11/168, International Monetary Fund.
  12. Kojima, Masami, 2013. "Drawing a roadmap for oil pricing reform," Policy Research Working Paper Series 6450, The World Bank.
  13. Breisinger, Clemens & Engelke, Wilfried & Ecker, Olivier, 2011. "Petroleum subsidies in Yemen: Leveraging reform for development," IFPRI discussion papers 1071, International Food Policy Research Institute (IFPRI).
  14. Marcella Nicolini & Simona Porcheri, 2012. "The Energy Sector in Mediterranean and MENA Countries," Working Papers 2012.73, Fondazione Eni Enrico Mattei.

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