Issues in Domestic Petroleum Pricing in Oil-Producing Countries

Abstract

This paper discusses issues relating to the domestic pricing of petroleum in oil-producing countries. It finds that in most major oil-exporting countries, government policies keep domestic prices below free-market levels, resulting in implicit subsidies that equaled 3.0 percent of GDP, on average, in 1999. Moreover, the paper argues, these petroleum subsidies are inefficient and inequitable-entailing substantial opportunity costs in terms of forgone revenue or productive spending-and also procyclical, complicating macroeconomic management. Nonetheless, the elimination of petroleum subsidies is often politically difficult, although countervailing measures and publicity campaigns can help engender support for reform.

Endogenous Growth, Asymmetric Trade and Resource Taxation

“…Second, if the initial state of a¤airs is a laissez-faire equilibrium, productivity di¤erences come into play: in the empirically plausible case where productivity growth is higher in the resource-poor economy, Home's incentive to raise the resource tax is reinforced whereas Foreign has an incentive to subsidize domestic resource use. Both these results appear consistent with the behavior that is typically observed in reality (Gupta et al 2002;Metschies, 2005).…”

“…On the one hand, oil-poor countries exhibit on average faster productivity growth than oil-rich countries. On the other hand, there is evidence of positive taxes on imported primary resources in OIM economies as well as of direct or indirect subsidies to domestic oil consumption in OEX economies (Gupta et al 2002;Metschies, 2005).…”

Reforming subsidies for fossil fuel consumption: Killing several birds with one stone

“…40 See Koplow (2009), pp.7-8. Noting that domestic transportation and distribution costs in developing countries are, on average, "remarkably similar" to those in developed countries, Gupta, Clements, Fletcher, and Inchauste (2003), p. 387, use costs from G-7 countries. At only about 2% of total costs, differences in international transportation costs Third, there is some disagreement on the proper treatment of taxes.…”

“…11 UNEP (2008), p. 7. 12 Among the many places these disadvantages are discussed are Gupta, Clements, Fletcher, and Inchauste (2003), UNEP (2004), pp. 147-54, OECD (2009), pp.…”

Optimum Tariffs and Exhaustible Resources: Theory and Evidence for Gasoline

“…However, such considerations are at the root of the very popular belief that some countries subsidize oil in order to operate transfers to some groups of consumers; see e.g. Gupta et al (2002). As they argue, such subsidies do not reach their supposed equity objectives.…”