Low Energy Prices Lead To Subsidy Cuts — Except in the US

The decline in oil prices provides the opportunity for countries to slash subsidies:

Across the Middle East and much of the developing world, government subsidies make energy cheap and encourage consumption. But governments around the world are beginning to take advantage of plummeting oil and natural gas prices by slashing the subsidies. The cuts are just a small fraction of the global total of annual subsidies, but energy experts say they are beginning to add up.

On Jan. 1, the Indonesian government abandoned a four-decade-old policy of subsidizing gasoline, permitting prices at the pump to rise and fall with global oil prices. As long as oil is cheap, Indonesians will not see much of a difference. Since October, India has stopped subsidizing diesel and raised fuel taxes. Malaysia cut subsidies on gasoline and diesel late last year. Angola, a major African producer, raised gasoline and diesel prices 20 percent in December. Ghana has also acted to remove subsidies, and Nigeria is expected to follow suit after its national elections in February. Iran cut gasoline subsidies early last year.

The US also provides gasoline subsidies, though the NY Times is confused about this:

The United States, like most developed countries, does not subsidize the consumption of energy or put price controls on fossil fuels, although environmentalists point out that oil companies receive tax breaks for exploration. A debate has begun about whether to raise gasoline taxes now to repair roads and bridges, as well as to damp demand for cheap fuel.

Actually, environmentalists would point out that the US provides huge subsidies to build and maintain roads. The gas tax collected at the pump covers only a small portion of cost of the highway infrastructure. If places like Indonesia, Iran, and Ghana can fix the subsidy problem, why can’t the US?

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