I have posted frequently (most recently in a three-part series that starts here)
on the topic of underpricing of energy in the United States, but we are
not the only offender. Many countries around the world subsidize
consumer energy prices in ways that bring them to levels even lower than
what U.S. consumers pay. These policies burden the rich and the poor
alike—rich countries like Saudi Arabia and poor ones like Egypt, and
within each country, both rich and poor citizens.
How subsidies hurt the poor
Fuel subsidies
both help and hurt consumers. The trouble is that poor consumers get a
disproportionately small portion of the help and a disproportionately
larger share of the hurt.
The help comes because subsidies make
fuels more affordable. That not only reduces direct costs for cooking
and lighting, but also indirectly holds other prices down, for example,
by reducing transportation costs for food. For individual families, the
price reductions can be most welcome. For example, a study by Arze del Granado and others,
cited by the IMF study, found that an increase of $.25 per liter in the
price of fuel would reduce the real purchasing power of a poor
household by more than 5 percent. >>>Read more
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