Issues in Domestic Petroleum Pricing in Oil-Producing Countries

IMF Working Papers, August 1, 2002

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Bibliographic details

• Authors: Sanjeev Gupta, Benedict J. Clements, Kevin Fletcher, Gabriela Inchauste
• Published: August 1, 2002
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451856132.001

Summary findings

• Government policies in most major oil-exporting countries keep domestic petroleum prices below free-market levels.
• Implicit petroleum subsidies equaled 3.0 percent of GDP, on average, in 1999.
• Petroleum subsidies are characterized as inefficient and inequitable.
• Subsidies entail substantial opportunity costs in terms of forgone revenue or productive spending.
• Petroleum subsidies are procyclical and complicate macroeconomic management.
• Elimination of petroleum subsidies is often politically difficult.

Analysis and implications

• Distributional and efficiency concerns:
  • Subsidies are inefficient and inequitable, implying misallocation of resources and adverse distributional outcomes.
• Macroeconomic management:
  • Procyclical nature of subsidies complicates macroeconomic policy and stabilization efforts.
• Fiscal cost:
  • Implicit subsidies represented a significant fiscal burden (3.0 percent of GDP, on average, in 1999).

Policy recommendations and reform considerations

• Subsidy reform is recommended to reduce inefficiency, inequity, and macroeconomic complications.
• Recognize political economy constraints:
  • Elimination of petroleum subsidies is often politically difficult.
• Measures to facilitate reform:
  • Countervailing measures and publicity campaigns can help engender support for reform.

Publication and metadata

• Title: Issues in Domestic Petroleum Pricing in Oil-Producing Countries
• Authors: Sanjeev Gupta, Benedict J. Clements, Kevin Fletcher, Gabriela Inchauste
• Publication date: August 1, 2002
• Series: Working Paper No. 2002/140
• Issue: 140
• Volume: 2002
• Pages: 31
• DOI: https://doi.org/10.5089/9781451856132.001
• ISBN: 9781451856132
• ISSN: 1018-5941
• Subjects: Commodities, Consumption, Energy subsidies, Expenditure, Fuel prices, National accounts, Oil, Oil prices, Prices
• Keywords: Consumption, country, domestic prices, Energy subsidies, excises, fiscal policy, free market price, Fuel prices, Global, government, incidence, max-min price stabilization law, Oil, Oil prices, petroleum, petroleum product price, price, reference price, subsidies, subsidy, subsidy reform, transfer program, world oil prices increase, WP

IMF Working Paper — Views expressed are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.

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• Issues in Domestic Petroleum Pricing in Oil-Producing Countries - WP/02/140
  • Issues in Domestic Petroleum Pricing in Oil-Producing Countries - WP/02/140 (Markdown version)
  • Issues in Domestic Petroleum Pricing in Oil-Producing Countries - WP/02/140 (PDF)