The Fuel Subsidy Myth

[Yusuf Mansur]

Venture Magazine, July 2012

What Jordanians need to know about the subsidy narrative.

For the longest time, the Government, its pundits, and independent commentators have discussed the necessity of eliminating subsidies crippling the budget. Among those subsidies are the alleged fuel subsidies, which have been the center of attention in recent years. But anyone with knowledge of international energy markets will tell you that the fuel subsidy discourse is fallacious. A Jordanian visiting Washington DC would observe that the price of fuel at the pump is identical to the price at the pump in Jordan. Of course, per capita income in Jordan is less than one twelfth that of DC. Moreover, Jordanians pay prices at the pump that are exactly the same as those paid in 2008, when oil prices reached $150 per barrel – 50 percent more than they are today. So what subsidy is the Government exactly speaking of?

The alleged subsidies are nothing more than re-allocations from the taxes levied on fuel derivatives, which are gargantuan. Fuel derivatives are taxed between 14.06–48.06 percent. Here is the sad story....continue reading on Venture