Coming Second and Third Order Effects of Cheap Oil

After raising electricity tariffs in early 2014, [the government] took advantage of lower energy prices in the second half of 2014 to reduce and ultimately remove remaining gasoline and diesel subsidies. … [Subsidy reform should] help broaden the base of [the] federal revenue system and diversify it away from volatile oil and gas revenues. A strengthening of Malaysia’s social safety net is an integral part of the authorities’ fiscal strategy. The removal of subsidies freed up resources that can be redirected to better support poorer households through better targeted cash transfers.
Countries from Oman to Indonesia have undertaken similar campaigns to scale back or  eliminate fuel subsidies. In India, the Modi government cut costly public subsidies of diesel fuel, which were long understood to be counterproductive but were nevertheless politically unpopular to shed. Energy subsidies, which amount to more than $540 billion per year worldwide, are as common as they are damaging to economies, the poor, and the environment, since they stimulate consumption and undermine efforts to save energy and use it more efficiently. According to the World Bank, these subsidies are highly regressive: As much as 60 or even 80 percent of what governments in the Middle East and North Africa spend to subsidize energy benefits the richest 20 percent of the population, with the poor receiving less than 10 percent of these public funds.

Good.

via How Cheap Oil Is Reshaping Global Hotspots – Defense One.

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