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Petroleum Product Subsidies: Costly, Inequitable, and On the Rise
Author:
John M. Piotrowski
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Mr. David Coady
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Justin Tyson
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Mr. Rolando Ossowski
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Mr. Robert Gillingham
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Mr. Shamsuddin Tareq
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Series:
IMF Staff Position Notes
Volume/Issue:
Volume 2010: Issue 005
Language:
English
Publication Date:
25 Feb 2010
DOI:
https://doi.org/10.5089/9781455239108.004
ISBN:
9781455239108
ISSN:
2617-6742
Pages:
20
Keywords:
SPN; subsidy; price; product; country; tax subsidy; petroleum product subsidy; subsidy reform; product price; petroleum subsidy; price subsidy; retailing cost; Oil; Oil prices; Inflation; Consumption; gas and mining taxes; Global
Legal-disclaimer:
The views expressed herein are those of the author(s) and should not be attributed to the IMF, its Executive Board, or its management.
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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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Cover IMF Staff Position Notes
IMF Staff Position Notes
ISSN:
2617-6742
Publisher:
International Monetary Fund