by Tyler Cowen
on June 20, 2013 at 1:43 pm
in Current Affairs
Fuel subsidies accounted for sixteen percent of the government’s budget last year. They are now trying to cut them back.
Oh, to have a government which subsidizes what people want instead of taxing it.
Want to venture how much of Indonesia’s government revenue was related to the 830900 barrels per day ( http://www.thejakartapost.com/news/2013/04/15/indonesia-s-oil-output-misses-1q-target.html – and I’m sure all that talk of decline is just talk ), with natural gas production of 82.8 billion cu m (2010 est.) ( http://www.indexmundi.com/indonesia/natural_gas_production.html )?
Admittedly, maybe the Indonesians became accustomed to be an oil exporting nation, instead of an importing one – oil imports: 767,400 bbl/day (2009 est.) http://www.indexmundi.com/indonesia/oil_imports.html
But there is shale gas – who knows, maybe Indonesia will be returning to its glory OPEC days. Probably around the same time the U.S. becomes energy independent.
The Indonesian government cut fuel subsidies already in 2001, 2001, 2002, 2003, 2005, 2008, 2010, 2011…
Each time met with large protests, which were then met with subsidies to things other than fuel (food, healthcare, even the thing which economists like most, which were targeted cash transfers to lower-income households).
So this has become a ritual of sorts. I’m not sure there would be so much media attention if not for coincident protests in Brazil and Turkey.
Not sure what percentage they are today, but in 2009 fuel subsidies in Iran were estimated to be 25% of GDP. http://iranprimer.usip.org/resource/subsidies-conundrum
Amateurs. Egypt spends about 1/3 of it’s budget on energy subsidies and more than half of that on petroleum subsidies.
 Castel Vincent, Reforming Energy Subsidies in Egypt, African Development Bank
This is extremely common in the developing world, map of countries by energy subsidy here: http://thinkprogress.org/climate/2012/07/10/513550/carbon-the-biggest-overlooked-fossil-fuel-subsidy/
I am sitting in Indonesia as we speak, and have been here for several weeks. This is, of course, a hot-button issue here, and a particularly interesting one to my eyes.
What’s important to consider here is that the fuel subsidy is seen by most as a subsidy for the wealthy – those who have cars and motorbikes. The sense I get from Indonesian people is that the government will use the revenue from the reduced fuel subsidy to provide other subsidies/services to the vast majority of Indonesians who do not own motor vehicles, in advance of the 2014 presidential election.
I am agree with Skip Intro.
Fuel subsidies benefits mostly to the middle and uper class, not the poor – according to the World Bank report.
If the government did not increase the fuel price, total subsidies would reach $32B this year, and that is equal with 20% of national budget. I’m an Indonesian, personaly, i’d rather have my government spend the money in education, health, infrastructures etc instead of burning all of them for nothing. We have been very spoiled with cheap fuel price and we take it for granted. In long term, this would cost us much more (inequality, environment damage, traffic etc). For years, policians have used the “fuel subsidies” to atrract voters, no one really try to push the policy into something more sustainable.
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