IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v139y2020ics0301421520301099.html
   My bibliography  Save this article

Quantifying the impacts of energy price reform on living expenses in Saudi Arabia

Author

Listed:
  • Bah, Muhammad Maladoh
  • Saari, M. Yusof

Abstract

As part of ‘Vision 2030’, Saudi Arabia has initiated a broad-based energy reform programme aimed at gradually reducing its dependence on oil. This paper assesses the impacts of energy price reforms on living expenses of various household groups in Saudi Arabia. For this purpose, the input-output table combined with household expenditure data are used to model the impacts. Results show that the distributional impacts of energy price reforms are regressive, with low-income households experiencing a higher increase in living expenses compared to high-income households. The impacts are primarily instigated by rising prices of energy-intensive products. After decomposing the impacts into direct and indirect effects, it was found that indirect effect is not only responsible for a considerable rise in household expenditure on energy-intensive products, but it is also distributionally regressive. It is therefore vital for policymakers to review and fine-tune the social protection system to protect poor households against reforms.

Suggested Citation

  • Bah, Muhammad Maladoh & Saari, M. Yusof, 2020. "Quantifying the impacts of energy price reform on living expenses in Saudi Arabia," Energy Policy, Elsevier, vol. 139(C).
  • Handle: RePEc:eee:enepol:v:139:y:2020:i:c:s0301421520301099
    DOI: 10.1016/j.enpol.2020.111352
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421520301099
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.enpol.2020.111352?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Moshiri, Saeed & Martinez Santillan, Miguel Alfonso, 2018. "The welfare effects of energy price changes due to energy market reform in Mexico," Energy Policy, Elsevier, vol. 113(C), pages 663-672.
    2. Cheon, Andrew & Urpelainen, Johannes & Lackner, Maureen, 2013. "Why do governments subsidize gasoline consumption? An empirical analysis of global gasoline prices, 2002–2009," Energy Policy, Elsevier, vol. 56(C), pages 382-390.
    3. Fahman Fathurrahman & Bora Kat & Uğur Soytaṣ, 2017. "Simulating Indonesian fuel subsidy reform: a social accounting matrix analysis," Annals of Operations Research, Springer, vol. 255(1), pages 591-615, August.
    4. Breton, Michèle & Mirzapour, Hossein, 2016. "Welfare implication of reforming energy consumption subsidies," Energy Policy, Elsevier, vol. 98(C), pages 232-240.
    5. Su, Bin & Ang, B.W. & Li, Yingzhu, 2017. "Input-output and structural decomposition analysis of Singapore's carbon emissions," Energy Policy, Elsevier, vol. 105(C), pages 484-492.
    6. Theresa Chaudhry & Azam Chaudhry, 2008. "The Effects of Rising Food and Fuel Costs on Poverty in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 13(Special E), pages 117-138, September.
    7. Jiang, Zhujun & Shao, Shuai, 2014. "Distributional effects of a carbon tax on Chinese households: A case of Shanghai," Energy Policy, Elsevier, vol. 73(C), pages 269-277.
    8. Mr. David Coady & Ian W.H. Parry & Louis Sears & Baoping Shang, 2015. "How Large Are Global Energy Subsidies?," IMF Working Papers 2015/105, International Monetary Fund.
    9. Abbas Valadkhani & William F. Mitchell, 2002. "Assessing the Impact of Changes in Petroleum Prices on Inflation and Household Expenditures in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 35(2), pages 122-132, June.
    10. Jim Krane, 2018. "Political enablers of energy subsidy reform in Middle Eastern oil exporters," Nature Energy, Nature, vol. 3(7), pages 547-552, July.
    11. Mr. Robert Gillingham & David Locke Newhouse & Mr. David Coady & Mr. Kangni R Kpodar & Moataz El-Said & Mr. Paulo A Medas, 2006. "The Magnitude and Distribution of Fuel Subsidies: Evidence from Bolivia, Ghana, Jordan, Mali, and Sri Lanka," IMF Working Papers 2006/247, International Monetary Fund.
    12. Albassam, Bassam A., 2015. "Economic diversification in Saudi Arabia: Myth or reality?," Resources Policy, Elsevier, vol. 44(C), pages 112-117.
    13. Arze del Granado, Francisco Javier & Coady, David & Gillingham, Robert, 2012. "The Unequal Benefits of Fuel Subsidies: A Review of Evidence for Developing Countries," World Development, Elsevier, vol. 40(11), pages 2234-2248.
    14. Dartanto, Teguh, 2013. "Reducing fuel subsidies and the implication on fiscal balance and poverty in Indonesia: A simulation analysis," Energy Policy, Elsevier, vol. 58(C), pages 117-134.
    15. Birol, F & Aleagha, AV & Ferroukhi, R, 1995. "The economic impact of subsidy phase out in oil exporting developing countries: a case study of Algeria, Iran and Nigeria," Energy Policy, Elsevier, vol. 23(3), pages 209-215, March.
    16. Li, Yingzhu & Shi, Xunpeng & Su, Bin, 2017. "Economic, social and environmental impacts of fuel subsidies: A revisit of Malaysia," Energy Policy, Elsevier, vol. 110(C), pages 51-61.
    17. Pachauri, Shonali & Spreng, Daniel, 2002. "Direct and indirect energy requirements of households in India," Energy Policy, Elsevier, vol. 30(6), pages 511-523, May.
    18. Jiang, Zhujun & Ouyang, Xiaoling & Huang, Guangxiao, 2015. "The distributional impacts of removing energy subsidies in China," China Economic Review, Elsevier, vol. 33(C), pages 111-122.
    19. Dennis, Allen, 2016. "Household welfare implications of fossil fuel subsidy reforms in developing countries," Energy Policy, Elsevier, vol. 96(C), pages 597-606.
    20. Wu, Rong-Hwa & Chen, Chia-Yon, 1990. "On the application of input-output analysis to energy issues," Energy Economics, Elsevier, vol. 12(1), pages 71-76, January.
    21. Saari, M. Yusof & Dietzenbacher, Erik & Los, Bart, 2016. "The impacts of petroleum price fluctuations on income distribution across ethnic groups in Malaysia," Ecological Economics, Elsevier, vol. 130(C), pages 25-36.
    22. Abbas Valadkhani & Alperhan Babacan & Parviz Dabir-Alai, 2014. "The impacts of rising energy prices on non-energy sectors in Australiaa," Economic Analysis and Policy, Elsevier, vol. 44(4), pages 386-395.
    23. Reinders, A. H. M. E. & Vringer, K. & Blok, K., 2003. "The direct and indirect energy requirement of households in the European Union," Energy Policy, Elsevier, vol. 31(2), pages 139-153, January.
    24. Liu, Hong-Tao & Guo, Ju-E & Qian, Dong & Xi, You-Min, 2009. "Comprehensive evaluation of household indirect energy consumption and impacts of alternative energy policies in China by input-output analysis," Energy Policy, Elsevier, vol. 37(8), pages 3194-3204, August.
    25. Zhang, Fan, 2011. "Distributional impact analysis of the energy price reform in Turkey," Policy Research Working Paper Series 5831, The World Bank.
    26. Choi, Jun-Ki & Bakshi, Bhavik R. & Haab, Timothy, 2010. "Effects of a carbon price in the U.S. on economic sectors, resource use, and emissions: An input-output approach," Energy Policy, Elsevier, vol. 38(7), pages 3527-3536, July.
    27. Hawdon, David & Pearson, Peter, 1995. "Input-output simulations of energy, environment, economy interactions in the UK," Energy Economics, Elsevier, vol. 17(1), pages 73-86, January.
    28. Plante, Michael, 2014. "The long-run macroeconomic impacts of fuel subsidies," Journal of Development Economics, Elsevier, vol. 107(C), pages 129-143.
    29. Edgar F.A. Cooke & Sarah Hague & Luca Tiberti & John Cockburn & Abdel-Rahmen El Lahga, 2016. "Estimating the impact on poverty of Ghana’s fuel subsidy reform and a mitigating response," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 8(1), pages 105-128, March.
    30. Atalla, Tarek N. & Gasim, Anwar A. & Hunt, Lester C., 2018. "Gasoline demand, pricing policy, and social welfare in Saudi Arabia: A quantitative analysis," Energy Policy, Elsevier, vol. 114(C), pages 123-133.
    31. Siddig, Khalid & Aguiar, Angel & Grethe, Harald & Minor, Peter & Walmsley, Terrie, 2014. "Impacts of removing fuel import subsidies in Nigeria on poverty," Energy Policy, Elsevier, vol. 69(C), pages 165-178.
    32. Li, Ke & Jiang, Zhujun, 2016. "The impacts of removing energy subsidies on economy-wide rebound effects in China: An input-output analysis," Energy Policy, Elsevier, vol. 98(C), pages 62-72.
    33. Solaymani, Saeed & Kari, Fatimah, 2014. "Impacts of energy subsidy reform on the Malaysian economy and transportation sector," Energy Policy, Elsevier, vol. 70(C), pages 115-125.
    34. Gangopadhyay, Shubhashis & Ramaswami, Bharat & Wadhwa, Wilima, 2005. "Reducing subsidies on household fuels in India: how will it affect the poor?," Energy Policy, Elsevier, vol. 33(18), pages 2326-2336, December.
    35. Rentschler, Jun, 2016. "Incidence and impact: The regional variation of poverty effects due to fossil fuel subsidy reform," Energy Policy, Elsevier, vol. 96(C), pages 491-503.
    36. Silva, Patricia & Klytchnikova, Irina & Radevic, Dragana, 2009. "Poverty and environmental impacts of electricity price reforms in Montenegro," Utilities Policy, Elsevier, vol. 17(1), pages 102-113, March.
    37. Arzaghi, Mohammad & Squalli, Jay, 2015. "How price inelastic is demand for gasoline in fuel-subsidizing economies?," Energy Economics, Elsevier, vol. 50(C), pages 117-124.
    38. Vagliasindi, Maria, 2012. "Implementing energy subsidy reforms : an overview of the key issues," Policy Research Working Paper Series 6122, The World Bank.
    39. Saboohi, Y., 2001. "An evaluation of the impact of reducing energy subsidies on living expenses of households," Energy Policy, Elsevier, vol. 29(3), pages 245-252, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lyu, Yanwei & Wu, You & Zhang, Jinning, 2023. "How industrial structure distortion affects energy poverty? Evidence from China," Energy, Elsevier, vol. 278(C).
    2. Lin, Boqiang & Li, Zhensheng, 2021. "Does natural gas pricing reform establish an effective mechanism in China: A policy evaluation perspective," Applied Energy, Elsevier, vol. 282(PA).
    3. Maruyama Rentschler,Jun Erik & Hosoe,Nobuhiro, 2022. "Illicit Schemes : Fossil Fuel Subsidy Reforms and the Role of Tax Evasion and Smuggling," Policy Research Working Paper Series 9907, The World Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aiman Albatayneh & Adel Juaidi & Francisco Manzano-Agugliaro, 2023. "The Negative Impact of Electrical Energy Subsidies on the Energy Consumption—Case Study from Jordan," Energies, MDPI, vol. 16(2), pages 1-17, January.
    2. Cecile Couharde & Sara Mouhoud, 2020. "Fossil Fuel Subsidies, Income Inequality, And Poverty: Evidence From Developing Countries," Journal of Economic Surveys, Wiley Blackwell, vol. 34(5), pages 981-1006, December.
    3. Scobie, Michelle, 2017. "Fossil fuel reform in developing states: The case of Trinidad and Tobago, a petroleum producing small Island developing State," Energy Policy, Elsevier, vol. 104(C), pages 265-273.
    4. Acharya, Rajesh H. & Sadath, Anver C., 2017. "Implications of energy subsidy reform in India," Energy Policy, Elsevier, vol. 102(C), pages 453-462.
    5. Xu, Shang & Zhang, Jun, 2023. "The welfare impacts of removing coal subsidies in rural China," Energy Economics, Elsevier, vol. 118(C).
    6. Jun Rentschler & Morgan Bazilian, 2017. "Policy Monitor—Principles for Designing Effective Fossil Fuel Subsidy Reforms," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 11(1), pages 138-155.
    7. Henseler, Martin & Maisonnave, Helene, 2018. "Low world oil prices: A chance to reform fuel subsidies and promote public transport? A case study for South Africa," Transportation Research Part A: Policy and Practice, Elsevier, vol. 108(C), pages 45-62.
    8. Jun E Rentschler & Nobuhiro Hosoe, 2017. "Illicit dealings: Fossil fuel subsidy reforms and the role of tax evasion and smuggling," GRIPS Discussion Papers 17-05, National Graduate Institute for Policy Studies.
    9. Dennis, Allen, 2016. "Household welfare implications of fossil fuel subsidy reforms in developing countries," Energy Policy, Elsevier, vol. 96(C), pages 597-606.
    10. Ilyas, Rubina & Hussain, Khadim & Ullah, Mehreen Zaid & Xue, Jianhong, 2022. "Distributional impact of phasing out residential electricity subsidies on household welfare," Energy Policy, Elsevier, vol. 163(C).
    11. Jiang, Zhujun & Ouyang, Xiaoling & Huang, Guangxiao, 2015. "The distributional impacts of removing energy subsidies in China," China Economic Review, Elsevier, vol. 33(C), pages 111-122.
    12. Shehabi, Manal, 2020. "Diversification effects of energy subsidy reform in oil exporters: Illustrations from Kuwait," Energy Policy, Elsevier, vol. 138(C).
    13. Ian Coxhead & Corbett Grainger, 2018. "Fossil Fuel Subsidy Reform in the Developing World: Who Wins, Who Loses, and Why?," Asian Development Review, MIT Press, vol. 35(2), pages 180-203, September.
    14. Lin, Boqiang & Kuang, Yunming, 2020. "Household heterogeneity impact of removing energy subsidies in China: Direct and indirect effect," Energy Policy, Elsevier, vol. 147(C).
    15. H. Xavier Jara & Marcelo Varela & Po Chun Lee & Lourdes Montesdeoca, 2018. "Fuel subsidies and income redistribution in Ecuador," WIDER Working Paper Series 144, World Institute for Development Economic Research (UNU-WIDER).
    16. Zhan-Ming Chen, 2017. "Inventory and Distribution of Energy Subsidies of China," The Energy Journal, International Association for Energy Economics, vol. 0(KAPSARC S).
    17. Andrew Feltenstein & Biplab DattaAuthor-Email: bdatta2@student.gsu.edu, 2018. "Broad Based Subsidies or Targeted Transfers? An Analysis of the Electricity Subsidy in Pakistan," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1801, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    18. Ghosh, Probal P., 2022. "Impact of India's diesel subsidy reforms and pricing policy on growth and inflation," Energy Economics, Elsevier, vol. 113(C).
    19. Boudekhdekh, Karim, 2022. "A comparative analysis of energy subsidy in the MENA region," MPRA Paper 115275, University Library of Munich, Germany.
    20. Xavier Jara & Po Chun Lee & Lourdes Montesdeoca & Marcelo Varela, 2018. "Fuel subsidies and income redistribution in Ecuador," WIDER Working Paper Series wp-2018-144, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    Input-output; Energy price; Distributional impact;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:139:y:2020:i:c:s0301421520301099. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.