Persistent, pernicious fuel subsidies
VENEZUELA has no shortage of problems, but one of the more curious is its cheap petrol prices.
Drivers pay roughly the equivalent of 40 cents a gallon (3.7 litres) for regular gasoline, and that is after the government raised prices slightly in a minor adjustment in a vast, popular subsidy, which is helping to prop up the tottering government politically, while helping to bankrupt it economically. With little incentive to conserve fuel and the more they drive, Venezuelans release more greenhouse gases into the atmosphere, which contribute to climate change.
Venezuela is hardly the only developing country wasting oil and natural gas with consumer subsidies. In many nations, transportation fuels are as cheap as soda. Electricity rates are so discounted in the Persian Gulf states that some residents do not bother to turn down their air-conditioners while away on vacation.
By some estimates, the consumption subsidies may be responsible for over 10 percent of total global emissions of carbon dioxide, the leading greenhouse gas. They also contribute to traffic jams and air pollution in cities across the developing world.
When oil prices tumbled in late 2014, environmentalists and economists at the World Bank and the International Monetary Fund urged governments to abandon policies that froze energy rates at artificially low levels. A substantial number of governments announced pricing policy changes, seizing the opportunity to improve their finances. Malaysia and Morocco ended petrol and diesel subsidies, while India not only stopped subsidising diesel but raised fuel taxes.
But many governments stood still or failed to fulfil their policies, despite making vows to decrease carbon emissions at the December climate summit in Paris. In some cases, street protests and election campaign pressures halted reforms; in others, special interest groups lobbied to stall or upend change.
The Supreme Court of Argentina recently dealt the country’s new leader, President Mauricio Macri, a political defeat by reversing a gas price increase for residential users. Energy subsidies account for over half the Argentine government’s deficit.
Progress in cutting consumption subsidies has been uneven.
Egypt earlier this month announced an increase in fuel prices after a devaluation of the currency that will raise the price of imported energy. Iran missed its target to end its subsidies last year.
And while Qatar has raised electricity prices for foreigners, its own citizens still cool their homes virtually free. “It’s human nature, not just Arab nature, to bridle when something that was once free or low cost suddenly costs more,” said Chase Untermeyer, a former United States ambassador to Qatar, “even if the consumers can easily afford it”.