The Economic Cost of Global Fuel Subsidies

17 Pages Posted: 13 Dec 2013

See all articles by Lucas W. Davis

Lucas W. Davis

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Date Written: December 2013

Abstract

By 2015, global oil consumption will reach 90 million barrels per day. In part, this high level of consumption reflects the fact that many countries provide subsidies for gasoline and diesel. This paper examines global fuel subsidies using the latest available data from the World Bank, finding that road-sector subsidies for gasoline and diesel totaled $110 billion in 2012. Pricing fuels below cost is inefficient because it leads to overconsumption. Under baseline assumptions about supply and demand elasticities, the total annual deadweight loss worldwide is $44 billion. Incorporating external costs increases the economic costs substantially.

Suggested Citation

Davis, Lucas W., The Economic Cost of Global Fuel Subsidies (December 2013). NBER Working Paper No. w19736, Available at SSRN: https://ssrn.com/abstract=2367146

Lucas W. Davis (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

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Berkeley, CA 94720
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National Bureau of Economic Research (NBER)

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