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which led to an increasing number of cities,
residential areas, roads, power generation
plants, and the infrastructure in general.
As a result of the current energy subsidy
mechanism,
high-income
individuals
benefited from the system more than those
with limited-income. An IMF study said
that high-income categories, which are less
populated, claim more than 40% of the oil
products subsidies. Also, energy subsidy
policies helped highly energy-consuming
industries to grow more than small and
medium size industries, which resulted in a
decline in energy efficiency and an increase in
public budget burdens for member countries.
On another note, low fuel prices
contributed to a drop in the revenues of the
petroleum and electricity sectors’ investment,
which hugely caused investment in new and
renewable energy sectors to drop, and fuel
smuggling from countries that subsidize fuel
to their neighbors to rise.
In light of the big developments in the
world economy and the global oil market
due to the drop of oil prices, which led to
the creation of great economic challenges
for oil and gas exporting countries, including
OAPEC members, most OAPEC member
countries announced comprehensive revision
of their energy subsidies policies to control
domestic energy consumption, ensure that
their energy subsidies policies do not deviate
from their planned goals, and handle the
increasing burdens on public budgets.
Recently, we noticed the huge interest of
global media and social media in reforming
energy subsidies policies in OAPEC member
countries. Various views, whether against or
in favor of these policies, emerged.
OAPEC, while closely observing
developments in the Arab and international
petroleum industry, appreciates the member
countries’ efforts in this regard. OAPEC
sees that continuing with the current energy
subsidy programmes in a general way would
not help limited-income categories targeted
by these programmes, and might hinder
opportunities for an overall sustainable
economic growth on one hand, and reaching
an ideal use of economic resources on the
other hand.
For their subsidies reforms to succeed,
OAPEC member countries need to carefully
plan and ensure that these reforms would
not affect limited-income categories. This
can happen by adopting clear strategies and
goals through which reform impacts can be
assessed to design the necessary measures to
reduce any negative impacts of these policies
while using surpluses resulting from these
reforms in building up new aspects of public
spending.