Global oil prices and fuel subsidies: The price of oil dependency
Vadlamannati K.C. Adhikari B. King J.
March 2024Elsevier Ltd
Extractive Industries and Society
2024#17
What effect does the price of oil have on fuel subsidies in oil-dependent states? We argue that the level of fuel subsidies is predicated on the price of oil globally. We posit that when the price of oil is high, oil-dependent states maintain high levels of fuel subsidies. In contrast, when oil prices are low globally, governments in oil-dependent states face pressure to reduce spending, a politically fraught scenario, that should lead the regime to decrease fuel subsidies. However, some oil-dependent states are able to maintain high levels of fuel subsidies when oil prices are low because they have large foreign exchange reserves, allowing them to continue providing fuel subsidies at the same level as when oil prices are high. Using a series of ordinary least square linear regressions and data covering 161 countries during the 1990–2014 period, we find strong empirical support for our theoretical expectations.
Foreign exchange reserves , Fuel subsidies , Oil prices , Oil-dependent economies
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School of Politics & International Relations, University College Dublin, Ireland
Political Science and International Relations Department, Nazarbayev University, Kazakhstan
Department of International Studies, American University of Sharjah, United Arab Emirates
School of Politics & International Relations
Political Science and International Relations Department
Department of International Studies
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