The Economic Cost of Global Fuel Subsidies

Lucas Davis

American Economic Review, 2014, vol. 104, issue 5, 581-85

Abstract: By 2015, global oil consumption will reach 90 million barrels per day. In part, this high level of consumption reflects the fact that many countries provide subsidies for gasoline and diesel. This paper examines global fuel subsidies using the latest available data from the World Bank, finding that road-sector subsidies for gasoline and diesel totaled $110 billion in 2012. Pricing fuels below cost is inefficient because it leads to overconsumption. Under baseline assumptions about supply and demand elasticities, the total annual deadweight loss worldwide is $44 billion. Incorporating external costs increases the economic costs substantially.

JEL-codes: Q31 Q35 Q38 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.5.581
References: Add references at CitEc
Citations: View citations in EconPapers (52)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.104.5.581 (application/pdf)
http://www.aeaweb.org/aer/app/10405/P2014_1155_app.pdf (application/pdf)
http://www.aeaweb.org/aer/data/10405/P2014_1155_data.zip (application/zip)
http://www.aeaweb.org/aer/ds/10405/P2014_1155_ds.zip (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: The Economic Cost of Global Fuel Subsidies (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:104:y:2014:i:5:p:581-85

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().