Thursday, July 3, 2008

Fuel market skewed by subsidies

The carbon-auto industry is heavily subsidized. Many governments around the world keep transport fuel costs artificially low with subsidies. They could instead use that money to invest in free public transport. From the

HALF of the world's population enjoys fuel subsidies. This estimate, from Morgan Stanley, implies that almost a quarter of the world's petrol is sold at less than the market price. The cheapest petrol is in Venezuela, at 5 cents per litre.
...In theory, rising crude-oil prices should reduce global demand. But if domestic prices are capped, then emerging economies will continue to guzzle oil, pushing world prices still higher. Emerging economies accounted for more than the whole increase in world oil consumption last year—because demand in the rich economies fell. But recent price increases will make little difference to global consumption unless China and India follow suit.
....An IMF study of five emerging economies found that the richest 20% of households received, on average, 42% of total fuel subsidies; the bottom 20% received less than 10%....