Fossil Fuel Subsidy and Pricing Policies : Recent Developing Country Experience
The steep decline in the world oil price in the last quarter of 2014 slashed fuel price subsidies. Several governments responded by announcing that they would remove subsidies for one or more fuels and move to market-based pricing with full cost re...
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| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2016
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| Online Access: | http://documents.worldbank.org/curated/en/2016/01/25762644/fossil-fuel-subsidy-pricing-policies-recent-developing-country-experience http://hdl.handle.net/10986/23631 |
| Summary: | The steep decline in the world oil price
in the last quarter of 2014 slashed fuel price subsidies.
Several governments responded by announcing that they would
remove subsidies for one or more fuels and move to
market-based pricing with full cost recovery. Other
governments took advantage of low world prices to increase
taxes and other charges on fuels. However, the decision to
move to cost recovery and market prices, ending budgetary
support, has not been implemented consistently across
countries. Policy announcements have varied in the way they
were communicated and the level of detail provided. When
petroleum product prices bounced back during the first half
of 2015, some reforming governments failed to raise prices
correspondingly. Recent experience suggests that regular and
frequent price adjustments, however small—as in Jordan and
Morocco—help the government and consumers to get accustomed
to fluctuations in world fuel prices and exchange rates. By
contrast, freezing prices, even for a few months—for
socioeconomic considerations or because the needed
adjustments are small enough to be absorbed—increases the
risk of reversion to ad hoc pricing and price subsidies. The
more formally the decision to move to market-based pricing
is communicated, the more public new price announcements,
and the higher the frequency of price changes, the more
likely the implementation of the announced pricing policy
reform will be sustained. |
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