Gasoline in the Middle East costs 50 cents a gallon, in Venezuela 11 cents a gallon. Clearly the latter subsidizes, but the prior does not.
Not they both subsidize.
Oil is worth $70 or more per barrel if you let the refiner use it for less than that than you are subsidizing. Even if you are the refiner as well the raw material has a value, and it is $70+ per barrel and it does get used up in the refining process.
Also many ME countries have more explicit and direct subsides.
"Iraqi Leaders Are Also Making Tough Choices Necessary To Reform Their Economy. Iraq is easing gasoline subsidies, which made fuel prices artificially low, creating incentives for black-market corruption and crime. Changing these subsidies is a necessary step on the path to reform. Gasoline subsidies, along with other subsidies, consume over half of Iraq's annual operating budget - diverting critical resources from health, education, infrastructure, and security. Addressing these subsides will allow Iraqi leaders to better provide for their people and build a modern economy."
whitehouse.gov
"Despite higher oil revenues, Iranian budget deficits remain a chronic problem, in part due to large-scale state subsidies on foodstuffs, gasoline, etc. Expenditures on fuels were estimated at $4.7 billion in 2004, and the country's parliament (the Majlis) has rejected measures to raise consumer prices. To the contrary, in January 2005, the Majlis decided to freeze domestic prices for gasoline and other fuels at 2003 levels. Currently, gasoline costs less than 40 cents per gallon in Iran, far below market cost."
peakoildebunked.blogspot.com
"Thanks to generous government subsidies on petroleum products — which the International Monetary Fund criticized as a threat to the country's fragile economy — Iraq has some of the cheapest gas in the world.
By contrast, Americans pay about $2.55 a gallon and Britons pay $6.24. Iraqis also pay much less for a gallon of regular gasoline than in nearby countries such as Iran (38 cents), Jordan ($1.89) and Syria ($1.74).
Even the many Iraqis who pay higher, black-market prices at the pump often make money by smuggling gasoline into neighboring countries such as Turkey, according to the IMF's report.
Iraq's government hasn't been able to fulfill its promise to the IMF to slash the massive subsidies, given how much the country already is suffering from escalating violence by insurgents, high unemployment and inflation, and poor electricity, water and sewage services.
Last month, the Yemeni government agreed to reverse its earlier decision to lift subsidies on oil products after a wave of riots and strikes swept Yemen's major cities.
In 2004, gasoline subsidies alone cost the Iraqi government $3 billion, the IMF said."
sfgate.com
"Iraq Fuel Subsidies Create Thriving Black Market and Shortages
Iraq provides a good lesson on the problems that occur when prices are fixed at non-market clearing levels through government intervention. Subsidized fuel in Iraq costs the government nearly seven billion dollars, a figure representing over a quarter of Iraq’s GDP, and cause classic problems such as black market activity and shortages:
economistsview.typepad.com
"The Government of Saudi Arabia has recorded budget deficits
annually for the last decade, with the shortfall for 1992
estimated at more than $10.5 billion (or nine percent of GDP).
The government originally financed its fiscal shortfalls by
drawing down deposits in the Saudi Arabian Monetary Agency
(SAMA), the country's Central Bank, and began borrowing in 1988
to conserve its remaining assets. Defense and security account
for nearly one-third of all expenditures, and the government
also makes large outlays for salaries, capital projects,
services, and operations and maintenance programs. The
government foregoes a potentially significant amount of
budgetary income because it subsidizes prices for water,
energy, housing, and gasoline and free education and health
care."
dosfan.lib.uic.edu
"Egypt has also long subsidised several varieties of fuel, particularly diesel and regular gasoline."
arabist.net
"Late last month, the Egyptian government reduced subsidies on gas, and the price at the pump jumped 30 percent from 65 to 84 cents a gallon."
wtop.com
"TEHRAN, July 16 (UPI) -- Iran, the world's fourth-largest oil exporter, is in an increasing struggle over the cost of its gasoline imports, The New York Times said.
With a looming threat of economic sanctions over Iran's nuclear activities, the price of crude oil has been pushed to over $78 a barrel. However, the Times reported the demand for gasoline is far outstripping Iran's domestic refining capacity.
Iran buys foreign gasoline for just over 50 cents a liter ($2 a gallon) and sells it for about 8 cents a liter (less then 40 cents a gallon). These are the highest subsidies in the region, the Times said."
digis.net
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In the US taxes alone add about 50 cents to each gallon sold. Special requirements for refining and blending gasoline also add money. Note that Iran (since it lacks refining capability) imports gasoline for about $2.00 a gallon. That wholesale, not retail. Add in distribution costs, 50 cents a gallon in taxes, the extra refining costs to meet US environmental requirements. The fact that many locations require 10% ethanol to be added to the gasoline, and the ethanol has a current price of $5.75 on East Coast spot markets (as of 6/21, see article below). Then add in a modest mark up for retail costs and profits, and its easy to see how $3 a gallon or more is reached.
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"Ethanol gets pricier but could plummet next year
Posted 6/21/2006 11:23 PM ET E-mail | Save | Print |
By Chris Woodyard, USA TODAY
Ethanol prices are hitting record levels this week, adding to the cost of gasoline as the nation heads into the peak vacation driving season.
A gallon of ethanol was going for as much as $5.75 on East Coast spot markets, more than double the $2.54 that it fetched as recently as three months ago, says Tom Kloza, analyst for the Oil Price Information Service.
Ethanol, grain alcohol usually distilled from corn in the USA, is added to gasoline to create a more environmentally friendly fuel required during the summer in many major cities. Ethanol has gradually replaced MTBE, a petroleum-based additive thought to cause cancer, as the lower-polluting alternative. And demand has outstripped supply.
With ethanol prices so high, the 10% of ethanol in reformulated gasoline, as the blend is called, could add about 30 cents a gallon to the cost of gas, Kloza says.
"In general, I think we are going to see the highest prices for gas that we've ever seen" this summer, he says. Reason: high demand. "People tend to take July and August vacations regardless of the price of fuel."..."
usatoday.com |
