International Journal of Technology Enhancements and Emerging Engineering Research (ISSN 2347-4289)

IJTEEE >> Volume 1 - Issue 5, December 2013 Edition

International Journal of Technology Enhancements and Emerging Engineering Research  
International Journal of Technology Enhancements and Emerging Engineering Research

Website: http://www.ijteee.org

ISSN 2347-4289

The Lack Of Proper Distribution Of Energy Subsidies Endangers The Arab World

[Full Text]



Mohammed Saleh Al. Ansari



Keywords: Electricity, Arab world, Gulf Cooperation Councils, Environment, Reform



Abstract: Policies regarding maintaining domestic energy costs have been a menacing problem politically and economically within the Arab countries, as well as within other parts of the world. Many objectives have been put forward to assist with energy conservation. Of these objectives, there have been discussions about expanding residents access to energy sources, which will protect income strapped households; fostering the industrial growth of the energy sector, equally providing each individual with an allotted amount of energy that they are permitted to utilize, as well as enforcing that countries that are rich when it comes to natural gas and oil resources, renting out their resource to other countries that do not have the luxury of these two energy sources. Even though energy subsidies have been established as a means to distribute energy, this paper argues that distributing energy in this fashion is costly and an inefficient process of energy distribution. Energy subsidies contort the price of energy sources for their own personal gain, and not for the gain of the people that require the source but have no means to attain it. Energy subsidies do not render any benefits for median or low income households. Instead, the households that reap the benefits of energy subsidies are high income households and industries. Which high income households and larger corporations are benefiting from paying lower costs for their energy consumption, while households that are struggling to get by are being forced to chip away at the little scraps that they do have. However, despite all of the disadvantages of energy subsidies, they continue to play an important part in the safety net for poor individuals throughout the Arab world and all across the globe. Any attempts to eliminate the subsidies will lead to an absence in compensatory programmes that could in the end cause a further decline of the welfare of households and eliminate the competitive edge that certain industries possess. The only way that a successful reform can be attempted is if the government steps in and compensates the population benefiting from the energy subsidies, while reducing its influence through carefully planned mitigation techniques that will protect the poorest households while also assisting the economy to learn to adapt without the subsidies in place. Our argument is that reforming the way that energy is priced in the Arab world will prove to be beneficial from many different perspectives, offering potential avenues that can be taken to lead the reform. This paper recognizes the current political climate throughout the region will proclaim that domestic reform of the present energy prices will be a difficult process, the reform will need to be taken on as a medium to long-term endeavor in order for everyone to reap the benefits.



[1]. Aissaoui, A. (2012). 'Saudi Arabia's Economic Diversification - Progress in the Context of the GCC and Challenges', Chapter in Resource Blessed: The Challenge and Potential of Economic Growth and Diversification in the GCC, Gulf Research Center, forthcoming, 2012.

[2]. Bressand, F., Farrell, D., Haas, P., Morin, F., Nyquist, S., Remes, J., Roemer, S ., Ro gers, M., Rosenfeld, J ., and Woetzel, J. (2007). Curbing Global Energy Demand Growth: The Energy Productivity Opportunity, McKinsey Global Institute, May 2007.

[3]. Clements, B. J., S. Gupta, and H.-S. Jung (2003). 'Real and distributive effects of petroleum price liberalization: The case of Indonesia' , IMF Working Papers 03/204, International Monetary Fund.

[4]. Deghaili, W. (2009). Improving Rural Livelihoods through Photovoltaic Electrification: The ESCWA Pilot in Kaawa, Yemen, UN Economic and Social Commission for Western Asia, Expert Group Meeting on 'Adopting the Sustainable Livelihoods Approach for Promoting Rural Development in the ESCWARegion', Beirut, 21-22 December 2009.

[5]. Del Granado,J.A., Coady, D., Gillingham, D. (2010). 'The Unequal Benefits of Fuel Subsidies: A Review of Evidence for Developing Countries', IMF Working Paper, WP/l0/202, September 2010, Washington D.C.: The International Monetary Fund.

[6]. Ebinger, c., Banks, J., Massy, K., and Avasarala, G. (2011). 'Models for Aspirant Civil Nuclear Energy Nations in the Middle East', Policy Brief 11-01, September 2011, Washington D.C.: The Brookings Institution.

[7]. Farrell, D., Remes, J., Bressand, P., Laabs, M., Sundaram, A. (2008). The Case for Investing in Energy Productivity, McKinsey Global Institute, February 2008.

[8]. Fattouh, B. (2011). 'The Saudi Gas Sector and its Role in Industrialization: Developments, Challenges and Options', in B. Fattouh and J. Stem (eds.), Natural Gas Markets in the Middle East and North Africa, Oxford: Oxford University Press.

[9]. Friedman, L. (2011). 'Middle East's Push Toward Renewable Energy Spurred by Rising Oil Prices', New York Times, 21 June 2011.

[10]. Kandil, M. (2010). 'The Subsidy System in Egypt: Alternatives for Reform', Policy Viewpoint Series, The Egyptian Centre for Economic Studies (ECES), Cairo, December 2010.

[11]. Koplow, D. (2009). Measuring Energy Subsidies Using the Price-Gap Approach: What does it leave out?.International Institnte for Sustainable Development: Winnipeg.

[12]. Ragab, A. (2010). 'Fossil Fuel Prices in the Arab World and the Fear of Reform', EschborniBonn: Deutsche Gesellschaft fur Technische Zusammenartbeit (GTZ)/Federal Ministry of Economic Development.

[13]. Shaher, M. (2011). 'Billions of rials lost from electricity sector', Yemen Times, 12 February 2011.

[14]. UNDP (2009). Arab Human Development Report 2009. UNEP (200S). Reforming Energy Subsidies Opportunities to Contribute to the Climate Change Agenda, United Nations Environment Programme.

[15]. UNEP/IEA (2001). 'Energy Subsidy Reform and Sustainable Development: Challenges for Policyrnakers, Submission to the 9th Session of the United Nations Commission on Sustainable Development.