This is an Open Access article. You will receive access to the full text.

Revisiting Energy Subsidy Calculations: A Focus on Saudi Arabia

Abstract:
The implicit nature of many energy subsidies has led to disagreements over what defines a ‘subsidy' while making it difficult to estimate their indirect fiscal cost. Most energy subsidies in Saudi Arabia are implicit, leading to forgone government revenue. Using a comprehensive dataset, we estimate energy subsidies in Saudi Arabia for ten fuels and electricity for the 2007–2018 period. We begin by applying the price-gap method, then introduce a formulation that better captures the forgone revenues from maintaining a subsidy, accounting for the domestic demand response to the removal of the subsidy, which in turn frees up exports that can reduce the international market price. Our method shows that the magnitude of Saudi Arabia's implicit energy subsidies may be overestimated. For instance, we find that the crude oil subsidy can fall from $8.6 billion (the price-gap estimate) to as low as $3.3 billion in 2018.

Download Executive Summary Download PDF

Keywords: Energy subsidies, Oil, Natural gas, Energy prices, Saudi Arabia

DOI: 10.5547/01956574.44.1.agas

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.

Published in Volume 44, Number 1 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

© 2024 International Association for Energy Economics | Privacy Policy | Return Policy