Petroleum Product Subsidies: Costly, Inequitable, and On the Rise

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

February 25, 2010

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John M. Piotrowski, David Coady, Justin Tyson, Rolando Ossowski, Robert Gillingham, and Shamsuddin Tareq. Petroleum Product Subsidies: Costly, Inequitable, and On the Rise, (USA: International Monetary Fund, 2010) accessed November 22, 2024

Summary

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.

Subject: Commodities, Consumption, Inflation, National accounts, Oil, Oil prices, Oil, gas and mining taxes, Prices, Taxes

Keywords: Consumption, Country, Gas and mining taxes, Global, Inflation, Oil, Oil prices, Petroleum product subsidy, Petroleum subsidy, Price, Price subsidy, Product, Product price, Retailing cost, SPN, Subsidy, Subsidy reform, Tax subsidy

Publication Details

Pages:

20
Volume:

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DOI:

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Issue:

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Series:

Staff Position Note No. 2010/005
Stock No:

SPNEA2010005
ISBN:

9781455239108
ISSN:

2617-6742

Notes

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