Why are fossil fuel subsidies so high? Lets start by seeing the relevant graph below, extracted from www.worldenergyoutlook.org/docs/weo2010/key_graphs.pdf Of the $312 Billion, approximately half of it is justified by subsidies in the Top 4 countries: Iran, Saudi Arabia, Russia and India. You'll probably notice that the first three are in the Top 4 oil producing nations: http://en.wikipedia.org/wiki/Petroleum
And when you read the Factsheet, you find the detailed composition of 312 Billion:
| In 2009, oil products and natural gas were the most heavily subsidised fuels, attracting subsidies totalling $126 billion and $85 billion, respectively. Subsidies to electricity consumption were also significant, reaching $95 billion in 2009. At only $6 billion, coal subsidies were comparatively small. |
So, only 40% of the subsidies are related to oil products, and not the whole, as some of the Media are hyping. To see in more detail where these subsidies are being used, we have to find somewhere else. The German Technical Cooperation (GTZ) has a worldwide compilation of international fuel prices (November 2008). You just have to look for the red countries below to find out that data from GTZ matches that of IEA:
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Please click the images for a detailed view. When one reads the news above, most of us would imagine that it is the Western world that is subsidizing fossil fuels. But when you look better, it's exactly the other way around. An even better view for gasoline and diesel prices is given below (from the GTZ document referred above):
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Now, you have to click these images, to get the details. Figure out where your country is. Mine is near the bottom, which is not good! Than try to locate those subsidy-dependent countries, mentioned above. Why should Venezuela's dictator, Hugo Chavez, cry out for more money, when in Venezuela one liter of gasoline costs only 2 US cents (8 US cents per gallon)? And why should President Mahmoud Ahmadinejad of Iran ask for money, when one liter of diesel only costs 3 US cents (11 US cents per gallon)? IEA has got a clue of what is going on, at least in Iran:
| The country with the highest subsidies in 2008 was Iran at $101 billion, or around a third of the country’s annual central budget. Chronic under-pricing of domestic energy in Iran has resulted in enormous subsidies and a major burden on the economy that is forcing reliance on imports of refined products. Iran’s leadership came to agreement in 2010 on a sweeping plan for energy subsidy reform; however, steep economic, political and social hurdles will need to be overcome if Iran is to realize lasting reform. |
And for Venezuela, it's just too easy to find it too. Chavez can't even deal with a multi-decade problem in his own country, but the fault is capitalism. While international journalists get surprised, it's a fuel tourism paradise for Colombian smugglers. There are other places in the world where this type of tourism is well known, and we Portuguese get to practice it a lot, in Spain. You can also find this problem discussed in the peer-review literature (PDF seems to be here).
It seems that I could go on, and on, with this document. The coal perspective is just too good to be true. The G20 meeting is just around the corner, and this document was clearly timed for it. And Cancun is only a few weeks away. Then, why should the western World be paying for a non-problem, when Iran is dedicating 20% of it's GDP to subsiding fuel costs? They alone wasted $100 Billion in 2008 in the process. And just guess where all that money comes from? So, why don't all these Greenies move to the Top 10 countries, in the first graph above, and get back some $200 Billion, for saving the planet?
