In Saudi Arabia, drivers pay roughly 45 cents a gallon to fill up their cars, and in Venezuela even less. Energy is so inexpensive in Kuwait and Qatar that residents chill their enormous swimming pools in the summer and typically leave their air-conditioners on at full blast while they are away on vacation.
Across the Middle East and much of the developing world, government subsidies make energy cheap and encourage consumption. But governments around the world are beginning to take advantage of plummeting oil and natural gas prices by slashing the subsidies. The cuts are just a small fraction of the global total of annual subsidies, but energy experts say they are beginning to add up.
Even with oil rebounding in recent days — including a 6 percent rise on Tuesday for the global Brent crude benchmark — the price is down nearly 50 percent from its peak last year of just over $110 a barrel.
On Jan. 1, the Indonesian government abandoned a four-decade-old policy of subsidizing gasoline, permitting prices at the pump to rise and fall with global oil prices. As long as oil is cheap, Indonesians will not see much of a difference. Since October, India has stopped subsidizing diesel and raised fuel taxes. Malaysia cut subsidies on gasoline and diesel late last year.
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That is because cutting subsidies often leads to a political backlash, energy experts say, and they have already emboldened the opposition in Kuwait. Cuts in energy subsidies helped produce serious political turbulence in Venezuela in 1993 and Indonesia in 1998, and more recently in Nigeria, Jordan and Ecuador.
At an energy conference in Abu Dhabi in December, Maria van der Hoeven, executive director of the Paris-based International Energy Agency, urged regional oil ministers to seize the moment of low energy prices to reduce subsidies.
“There is no time for action like the present,” she was quoted as saying by the Middle East Petroleum and Economic Publications, which is based in Cyprus. “It’s an opportunity to put a price on carbon and slash fossil fuel subsidies.”
