The Economic Cost of Global Fuel Subsidies

No 19736, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: H23 Q41 Q48 Q51 (search for similar items in EconPapers)
Date: 2013-12
New Economics Papers: this item is included in nep-agr, nep-ene and nep-tre
Note: EEE
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Citations: View citations in EconPapers (7)

Published as Lucas W. Davis, 2014. "The Economic Cost of Global Fuel Subsidies," American Economic Review, American Economic Association, vol. 104(5), pages 581-85, May.

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Journal Article: The Economic Cost of Global Fuel Subsidies (2014)
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