WPS6396 Policy Research Working Paper 6396 Petroleum Product Pricing and Complementary Policies Experience of 65 Developing Countries Since 2009 Masami Kojima The World Bank Sustainable Energy Department Oil, Gas, and Mining Unit April 2013 Policy Research Working Paper 6396 Abstract Unable to cope fully with steadily climbing world oil term, but frequently with serious negative consequences: prices since mid-2009, many of the 65 countries reviewed flourishing black markets, smuggling, fuel adulteration, in this paper have progressed slowly or even reversed illegal diversion of subsidy funds, large financial losses course in reforming pricing of petroleum products. suffered by fuel suppliers, deteriorating refining and End-user prices in July 2012 varied by two orders of other infrastructure, and acute fuel shortages causing magnitude across the countries. More than two-fifths, economy-wide damage. In several countries, subsidies, including some that had only recently adopted automatic price controls, and other restrictions have helped protect pricing mechanisms, froze the prices of gasoline, diesel, inefficient refineries and oil marketers. or both for months or even years on end during the Mitigation responses have included fuel conservation study period. When the prices were finally adjusted, the programs; fuel diversification, particularly liquid biofuels increases were sometimes substantial, leading to large- to substitute gasoline and diesel; and efforts to lower scale protests, partial or full reversals of price adjustments, costs of supply, including strengthening infrastructure, or softening of pricing reform policy. promoting price competition, hedging, negotiating price Governments’ attempts to keep domestic prices discounts with exporters, and bulk procurement. Various artificially low—through price control, export or forms of assistance to consumers have also been offered, quantity restrictions, or political pressure put on oil especially to households, agriculture, transport, and companies—have helped curb inflation in the short fisheries. This paper is a product of the Oil, Gas, and Mining Unit, Sustainable Energy Department. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The author may be contacted at mkojima@worldbank.org. The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Produced by the Research Support Team Petroleum product pricing and complementary policies: Experience of 65 developing countries since 2009 Masami Kojima 1 JEL codes: D40, H30, Q48 Key words: oil pricing policy, subsidies, social protection, gasoline, diesel, kerosene, liquefied petroleum gas, conservation, diversification, energy efficiency, renewable energy, ethanol, biodiesel, biofuel Sector Board: Energy and Mining 1 World Bank. The author is grateful to M. Khaliquzzaman, Veasna Bun, Eric Dacosta, Salam Almaroof, Somneuk Davading and Keomanivone Phimmahasa, Bayartungalag Gursanjid, Amanda Feese, Sylvie Nenonene, Clare Busingye, and Amir Althibah, all of the World Bank, and Alzira Ferreira of the United Nations World Food Programme for obtaining petroleum product price information for July 2012 in Bangladesh, Cambodia, Guinea Bissau, Iraq, Lao People’s Democratic Republic, Mongolia, Nigeria, Togo, Uganda, Yemen, and Tajikistan, respectively. The paper benefitted from helpful comments provided by Punam Chuhan-Pole, Jon Strand, Ruslan Yemtsov, and Ariel Yepez-Garcia of the World Bank; David Coady of the International Monetary Fund; Armin Wagner of Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ); and Ivetta Gerasimchuk, Tara Laan, and Peter Wooders of the International Institute for Sustainable Development (IISD). All remaining errors are the sole responsibility of the author. The findings, interpretations, and conclusions are the author’s own and should not be attributed to the World Bank, its Executive Board of Directors, or any of its member countries. 2 3 Contents 1. Introduction ................................................................................................................................................... 4 2. Approaches to Fuel Pricing ...................................................................................................................... 7 2.1 Retail prices ...................................................................................................................... 7 2.2 Considerations for price control ....................................................................................... 8 3. Government Interventions to Influence Prices and Their Consequences .......................... 12 3.1 Pricing, tax, and export policies ..................................................................................... 12 Price control .......................................................................................................................... 12 Oil funds for smoothing or lowering prices .......................................................................... 13 Price subsidies and reductions in taxes and other charges .................................................... 13 Subsidies borne by fuel suppliers ......................................................................................... 14 Export restrictions ................................................................................................................. 15 3.2 Impact on supply and demand ........................................................................................ 16 Lack of essential investment and disinvestment ................................................................... 16 Fuel shortages ....................................................................................................................... 16 Abuses ................................................................................................................................... 18 Inefficiency and environmental impact ................................................................................ 20 4. Steps to Reduce Oil Consumption ...................................................................................................... 21 4.1 Conservation................................................................................................................... 21 4.2 Diversification ................................................................................................................ 23 5. Mitigating Adverse Effects .................................................................................................................... 25 5.1 Efforts to lower costs of supply ..................................................................................... 26 Hedging ................................................................................................................................. 26 Price discounts for fuel imports and bulk procurement ........................................................ 26 Strengthening infrastructure for fuel imports, storage, and transport ................................... 27 Promoting price competition................................................................................................. 28 5.2 Assistance to consumers................................................................................................. 29 6. Observations .............................................................................................................................................. 30 Appendix 1: Pricing Policy Information by Country ............................................................................ 35 Appendix 2: Fuel Diversification and Energy Conservation Measures by Country ................. 77 Appendix 3: Fuel Prices and Pass-Through Coefficients .................................................................... 93 References .......................................................................................................................................................... 101 4 1. Introduction The prices of internationally traded fuels and food surged until mid-2008, fell sharply, and then began rising again, reversing much of the price fall by 2011. By one measure, the prices on the world market have nearly doubled since 2005 (Figure 1). The fiscal breakeven price of oil needed to balance the budget in major oil exporters has risen sharply in recent years, making the prospect of prolonged periods of low prices unlikely in the future. Equally important, the marginal cost of oil production in 2011 was US$92 a barrel for the 50 largest listed oil companies and could rise further if it continues to follow the long-term trend (Wall Street Journal 2012). Similarly, long-term growth in global demand for food and continuing U.S. ethanol demand for maize and EU biodiesel demand for vegetable oils are expected to keep prices of maize, oilseeds, and many other crops at historically high levels (USDA 2012b). Figure 1: Monthly indices for fuel and food prices since 2005 in low- and middle-income countries 300 Fuel 250 Price index, 2005 = 100 Food 200 150 100 50 0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Sources: World Bank 2013. Note: All prices are world prices. Fuel consists of 84.6 percent crude oil, 10.8 percent natural gas, and 4.7 percent coal. Food includes cereals, vegetable oils, meat, sugar, and fruits. Weights are based on developing countries’ export values in 2002–04. Indices are based on nominal prices in U.S. dollars. Many governments in developing countries control petroleum product prices. In the face of mounting subsidies, a number of governments seriously explored options for pricing reform in the period leading up to mid-2008. The budgetary pressure to press on with reform subsided briefly following the price collapse in late 2008, but those governments that had done little were caught by rising prices again soon thereafter. To the extent that price increases on the world market have been transmitted to the domestic market, soaring prices have led to calls on governments across the world to take action, ranging from providing greater safety nets to the poor and increasing the minimum wage to releasing oil from strategic reserves, reducing taxes, and granting outright price subsidies. Given the high share of household expenditure on food—in some low-income countries, the food share can be as high as half or more, and even in middle-income countries it is typically 20–30 percent (World Bank 2012b)—rising food prices have made fuel price reform, politically difficult under any circumstances, all the more challenging. Conversely, rising fuel prices have compounded the political difficulties of reducing food price subsidies, as households face rapidly increasing expenditures on other basic goods. As a result, some countries have seen people taking to the streets to protest both high food and energy prices. 5 Price transmission to the domestic market has differed markedly from country to country. In the case of petroleum products, aside from price differences due to transportation costs and differences in fuel quality, international crude oil and petroleum product prices are broadly uniform across all regions, so that differences in government pricing policies account for much of the differences in end-user prices. The price differences are significant: a recent price survey showed that the retail prices of four petroleum products in 65 developing countries in January 2012 varied by two orders of magnitude, with the lowest prices found predictably mostly in major net oil exporting countries (Kojima 2012). As in the years immediately following rising oil prices in 2004, which saw suspension of pricing policies linked to world price movements (Baig et al. 2007), some governments responded to high oil prices in 2011 and 2012 by freezing prices. Many interlinked developments have affected costs, availability, and prices paid for petroleum products in recent years: • Recent high oil prices have exacerbated the poor financial states of the national oil companies in some countries with price subsidies, leading to the inability to procure petroleum products on time, acute fuel shortages, and high black market prices. • Fuel price subsidies in the face of high world prices have increased incentives for diversion to black markets and smuggling to neighboring countries. Both smuggling and black marketing can push up domestic prices markedly above the official prices. • Power shortages in a number of countries have increased demand for diesel for emergency power generation, causing diesel fuel shortages in some markets and higher diesel prices. A growing cause of power shortage is declining rainfall, leading to falling hydropower generation in East Africa and elsewhere. • Piracy in the Gulf of Aden and the Indian Ocean has increased insurance costs, led to shipping delays, and at times caused fuel shortages in East Africa. • The challenges to the authorities mounted by citizens across the Middle East and North Africa since 2010 have stalled and sometimes reversed petroleum price reforms in several countries against the backdrop of declining perceived state legitimacy. This paper looks at various ways by which governments in developing countries have tried to deal with oil price volatility on the world market in recent years. The paper examines, from the point of view of consumers, issues related to oil prices in the downstream petroleum sector and other sectors where oil is an important input. It does not consider macro-level policies (such as monetary or exchange rate policy) or the impact of oil price changes on the macroeconomic performance of countries, nor does it discuss management of the windfall income by large oil exporters and the long-term economic consequences of revenue management. The paper is part of a larger on-going study assessing the implications of high oil prices and oil price volatility on fuel use, the downstream petroleum sector, and household fuel consumption in developing countries, and follows four previous publications (Bacon and Kojima 2006, 2008; Kojima 2009, 2012). In addition to fuel pricing policy, other coping mechanisms covered include fuel conservation programs; energy diversification; pressure on oil companies to accept lower profits or even losses; negotiation on prices or payment terms with governments of oil-exporting countries; increasing strategic and commercial reserves; hedging; assistance to households; and assistance to large petroleum product users such as transport companies, farmers, and fishermen. The German development agency, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), periodically provides a list of papers on policy responses (GIZ 2011). 6 GIZ conducts a global survey of gasoline and diesel prices in November every other year, the most recent having been completed in November 2012. It is also setting up a database of fuel pricing policy fact sheets, currently covering 136 countries and regions (Energypedia 2013). GIZ recently issued a sourcebook for policymakers on how to increase the energy efficiency of urban transport, one outcome of which would be a reduction in fuel consumption (GIZ 2012). Yépez- García and Dana (2012) reviewed how the power sector in oil-importing countries in Latin America and the Caribbean had handled exposure to oil price risk and propose a menu of options that include hedging, diversification from oil, energy efficiency improvement, and regional integration. Given the recent oil price levels, many reports on fuel price subsidies have been issued. They include a joint report by four international organizations on fossil fuel subsidies (IEA et al. 2011), various reports including case studies of fossil fuel subsidies published by the Global Subsidies Initiative (GSI), evidence on energy subsidies in developing countries (Vagliasindi 2012 and 2013), and papers by the staff of the International Monetary Fund (IMF), including IMF (2013a, 2013b), Arze del Granado, Coady, and Gillingham (2012), Coady, Flamini, and Antonio (2012), Guillaume, Zytek, and Farzin (2011), and Coady et al. (2010). This paper complements the above work by including more recent developments, the impact of interlinkages among different sectors on supply and prices, the impact of government policies on supply conditions, and unintended consequences of government policies. It also includes two specific mitigation policies to reduce demand for petroleum products: diversification and energy efficiency improvement. It addresses gasoline, diesel, kerosene, and liquefied petroleum gas (LPG), the last of which is widely used for cooking and heating in many countries and less covered in other studies. The paper provides the policy context for a recently published study on vulnerability to oil price risks and domestic retail price adjustments (Kojima 2012) and covers the same 65 developing countries (Table 1). Table 1: Characteristics of study countries Feature Number of countries Income category 16 low income, 24 lower-middle income, and 25 upper-middle income Region 9 in East Asia and Pacific, 4 in Europe and Central Asia, 17 in Latin America and the Caribbean, 8 in Middle East and North Africa, 5 in South Asia, and 22 in Sub-Saharan Africa Status of domestic refining industry 46 with domestic refineries Net oil export status 18 net oil exporters in 2010 Reliance on oil-based power generation 32 relying on petroleum products for 20% or more of power generated in 2010 Sources: Kojima 2012; IEA 2012b; Oil and Gas Journal 2012. This paper uses the numerical notation adopted in the United States. A billion is a thousand million (109) and a trillion is a million million (1012), in contrast to other parts of the world where a billion is a million million and a trillion is 1018. Exchange rates used to convert from local currency units to U.S. dollars are those prevailing at the time the prices, costs, or subsidies are quoted. Where the period covers several months or years, the average exchange rate is computed first to convert the amount into local currency. The same amount in local currency is likely to be different in U.S. dollars at different points in time. The experience of the 65 countries is presented as case studies in Appendices 1 and 2. Table A1.1 describes the pricing policies, subsidies and their consequences, demand and supply conditions, assistance to consumers, and in some cases hedging, strategic stockholding, and other 7 mitigation responses. Table A2.1 summarizes energy diversification policies, including liquid biofuels and compressed natural gas (CNG) to substitute gasoline and diesel, and energy conservation measures. The main report draws upon these two comprehensive tables to highlight important developments and distill lessons. The paper begins with different approaches to setting retail prices, followed by different forms of government interventions to lower prices and their effects on supply and demand, conservation and diversification measures to reduce oil consumption, and finally steps to mitigate the adverse effects of high oil prices. 2. Approaches to Fuel Pricing This study of 65 developing countries has found an array of pricing policies and mechanisms. Most study countries control prices, although the nature of control varies widely. 2.1 Retail prices The retail prices for gasoline, diesel, and kerosene converted to U.S. dollars per liter, and LPG in U.S. dollars per kilogram (kg) in July 2012 are shown in Figures A3.1–A3.4 in Appendix 3. Table 2 provides summary statistics. The wide ranges of prices for the four fuels illustrate large differences in subsidies, taxes, and costs. Turkey had the highest retail prices for gasoline, diesel, and kerosene, and the third highest for LPG, in part because of high taxes—making up 49 percent of the retail price for gasoline, 39 percent for diesel, and 32 percent for LPG for residential consumers (IEA 2012a). Uruguay closely followed Turkey for gasoline and diesel. Aside from Turkey and Uruguay, all other countries in the top five were in Sub-Saharan Africa, except Cambodia which ranked fifth for kerosene. Malawi had an exceptionally high unit price of LPG, 60 percent higher than the second highest price found in Uganda. At the opposite end of the spectrum, the lowest prices were found in República Bolivariana de Venezuela and Egypt, closely followed by the Islamic Republic of Iran and Iraq for gasoline and diesel, Indonesia and India for kerosene, and Iraq and Bolivia for LPG. República Bolivariana de Venezuela stands out as having petroleum product prices far lower than in any other country, with the exception of LPG, for which the official price in Egypt was even lower. Table 2: Summary statistics on retail prices in July 2012 Statistic Gasoline Diesel Kerosene LPG Minimum price, US$/liter or US$/kg 0.02 0.01 0.18 0.04 Maximum price, US$/liter or US$/kg 2.20 1.97 1.60 4.74 Average price, US$/liter or US$/kg 1.13 1.01 0.86 1.17 Median price, US$/liter or US$/kg 1.17 1.05 0.93 0.99 Total number of countries 64 64 44 52 Sources: See Tables A2.1 in Kojima (2012) and sources under “information� in Table A1.1. Note: Prices are in US$/liter for gasoline, diesel, and kerosene and US$/ kg for LPG. Prices available in Jamaica are tax-inclusive ex-refinery prices, and distribution margins can be significant. They are used for pass-through calculations but not for computing statistics on retail prices. The prices in July 2012 were compared to those in June 2009 to compute the degree of pass through of rises in international prices to retail prices in the domestic market. Appendix 3 describes the methodology and tabulates the pass-through coefficients in individual countries. Table 3 summarizes the results. Several countries had pass-through coefficients that were less than zero, not because they lowered prices, but because their currencies depreciated against the 8 U.S. dollar. About half of the countries passed through more than three-quarters of world price increases to consumers. It is worth noting that the world prices of LPG in July 2012 were markedly low: they were the lowest in two years except in the United States, where the prices in June 2012 were lower. The average FOB price of LPG in 2012 was more than double the price in July in North America and about 50 percent higher in the rest of the world. Despite the low world LPG prices, two-fifths of the countries had negative pass-through coefficients, and half had pass-through coefficients smaller than 75 percent. More detailed discussion on pass-through coefficients and the limitations of the methodology employed can be found in Kojima (2012). Table 3: Summary statistics on pass-through coefficients between January 2009 and July 2012 Statistic Gasoline Diesel Kerosene LPG Average pass-through, % 73 75 63 96 Median pass-through, % 79 84 82 76 # of countries with pass-through less than 0% 7 11 8 10 # of countries with pass-through between 0 and 75% 24 17 12 15 # of countries with pass-through greater than 75% 34 37 24 25 # of countries with pass-through greater than 100% 26 26 12 21 Total number of countries 65 65 44 50 Sources: Author’s calculations based on sources cited in Tables A2.1 and A2.3 in Kojima (2012) and sources under “information� in Table A1.1. 2.2 Considerations for price control In countries with price controls, the first question is whether the government is setting price ceilings or price levels, and where along the supply chain they should be set (ex-refinery, landed cost, wholesale, ex-depot, retail). The prices or price ceilings can be the same throughout the country or vary by location (Table 4). Table 4: Types of price control Mechanism Advantages Potential problems Price ceilings There is scope for price competition. If price ceilings are too high, there is little Divergence from ceilings suggests incentive to improve efficiency. If they are too emerging competition. There is less need low, fuel business may cease to be financially to get the prices “exactly right� than viable. controlling price levels. Price levels Greater control. There is no scope for price competition. If price levels are set too high, there is little incentive to improve efficiency, and if set too low, fuel business may cease to be financially viable. Control at retail Easy for consumers to check compliance. More assumptions are needed to calculate prices than controlling retail prices. Compliance is more difficult to monitor because the number of points to be checked is the largest at retail. Control at More transparent because of greater If competition is inadequate, margins could grow wholesale or correlation with benchmark international and retail prices could be markedly higher than elsewhere upstream prices, easier to monitor compliance otherwise. If upstream prices are set too low, oil of retail because there are fewer points of sale. companies may try to recover losses by increasing retail prices to compensate. Uniform prices Sense of national unity: one country, one Freight equalization introduces additional scope price. Easy for consumers to check for inefficiency as well as corruption. The size of compliance. cross-subsidization could become very large, to 9 Mechanism Advantages Potential problems the point of making the cost of compliance unacceptably high. Pricing by location Costs are better reflected. Consumers in remote areas may compare themselves to those in major cities and feel a sense of injustice. If costs of serving remote areas are too high, some remote areas may not be served. Source: Author. Price ceilings allow price competition. They also give an indication of the degree of competition in the market: if all prices are at the ceiling, there is little evidence of competition, but divergence from the ceiling may be a sign of emerging competition. If price ceilings are set too low, however, not only will all prices be at the ceiling, marketing petroleum products may not even be financially viable. If price ceilings are comfortably high to allow competition but all prices are at the ceiling, inefficient oil companies can continue to operate while efficient ones are not passing efficiency gains to consumers and retaining large profits instead. Setting price levels by definition eliminates scope for price competition. The problem of prices being set too high or too low applies equally to controlling price levels. Many governments control retail prices, but some control prices at wholesale or ex- refinery. In the extreme, where retail prices are controlled, wholesale prices may be higher than retail prices, undermining the financial viability of the retail business. An example is Kazakhstan where wholesale prices, which are not controlled and determined primarily by import prices, have matched or exceeded retail price ceilings set by the government in recent years; in response, the Kazakh oil ministry signed a memorandum with oil companies to limit wholesale prices to a maximum of 87 percent of the maximum retail price in August 2011 (Nefte Compass 2011). In rare cases, prices are controlled at several points in the supply chain, as in El Salvador, which sets maximum LPG prices at four points along the supply chain every month. Even when based on clearly defined formulas, computation of controlled prices is not easy. Although free-on-board (FOB) prices relevant to a given market are externally set, import prices contain elements specific to the market and depend on a number of factors that could lead to significant variations for the same FOB price, such as the dates of landing and foreign exchange acquisition. The agency in charge of price control needs to estimate costs of storage and transport, and what would be a reasonable margin along the supply chain. In a deregulated market, profits are not guaranteed, but a cost-plus formula is often structured to assure a profit margin at every stage along the supply chain, at least in theory. All too often, however, whether price ceilings or price levels, they tend to be set too low in times of rising or high oil prices, discouraging market entry and investment in the downstream sector, and sometimes even making compliance with safety, health, environment, and technical standards difficult. Dozens of governments in this study set uniform prices or price ceilings for at least one petroleum product, among other considerations to give a sense of equity. Freight equalization, however, provides additional scope for inefficiency as well as corruption—including claims of fuel delivery to areas far from import terminals or refineries, when they were actually sold in urban markets near these supply points. Absent adequate competition, price deregulation may result in high prices paid by consumers. This is one reason some governments adopt a formula-based automatic price adjustment mechanism as an interim step before full deregulation. In small markets, governments 10 may consider it unlikely that full competition would ever emerge and may continue to set price ceilings as a permanent means of consumer protection. If current subsidized prices are low, overnight adoption of a formula-based adjustment mechanism may entail a sharp price increase initially. To avoid such price shocks, intermediate smaller price increases may be necessary. Options include regular, steady price adjustments until cost-recovery levels are reached; gradually reducing the total subsidy bill each year and adjusting prices, volume, or both accordingly; first eliminating subsidies that benefit the rich disproportionately with little economy-wide benefits, such as high-octane gasoline; and rationing subsidized fuel and charging market prices outside the quota. More generally, where prices are controlled, one of the most important tasks for governments is establishing and implementing criteria for adjusting prices. Ad hoc pricing does not have clearly defined criteria. However, one unofficial trigger is the size of the total subsidy: governments start considering price increases seriously when the total subsidy starts exceeding the budget allocation or else what might be considered a “reasonable� share of the budget. Rule- based pricing requires decisions on the frequency of adjustments, selection of benchmark fuels, the averaging period for benchmark prices, and triggers for price adjustments. The longer the averaging period, the smoother the prices, but also the greater will be the probability of accumulating large deficits (Bacon and Kojima 2008, chapter 7). Triggers may be any deviation from the previous international benchmark price or a deviation exceeding a threshold amount. Where a price stabilization fund exists, criteria are needed to determine when to withdraw money from or deposit money into the fund. Table 5 provides a typology of different price adjustment mechanisms with their strengths and weaknesses. Country-specific details are provided in Table A1.1 in Appendix 1. Table 5: Typology of price adjustment mechanisms Mechanism Advantages Potential problems Steadily increase price at regular Each price increase is small and Could lose political commitment over time intervals until cost-recovery predictable time, and invite resentment if world levels are reached: prices are falling. If the increases are By a pre-determined monetary regular but small compared to world amount (Thailand for LPG for price increases, subsidies could vehicles and industry) continue for years (as in Mexico). By percentage (Mexico) Deregulate prices for higher-grade End subsidies to the rich, who are the Fuel switching by users from higher- fuels (Egypt, Indonesia, Malaysia) main consumers of higher-grade fuels. grade to cheaper fuel, adulteration of higher-grade fuels with subsidized fuels Ration heavily subsidized fuels, Limit subsidies Diversion of rationed fuels to black charge higher prices outside quota markets or smuggling (kerosene and LPG in India, gasoline and diesel in Iran) Set different prices depending on Limit subsidies Selling the same product at different user category (Costa Rica, India, prices invites corruption, starting with Indonesia, Iran, Malaysia, Nepal, diversion to consumers who are not Thailand) entitled to the subsidized fuel (essentially every country) Shift subsidy from one product to Subsidy for one product is completely Could lead to a growing subsidy on another (kerosene-to-LPG eliminated the product to which the subsidy is conversion in Indonesia) shifted (as in Indonesia) 11 Mechanism Advantages Potential problems Introduce a temporary stabilization Deal with large price shocks while Political pressure to repeatedly extend fund (Chile, Peru), temporary tax limiting the period of artificially low the phaseout date (Chile, Peru, reduction (diesel in Thailand) prices Thailand), resulting in a growing budgetary outlay Switch to rule-based pricing when No large price increases needed at the When world prices begin to rise, the world prices are low (China in Jan time of switching political will to adhere to rule-based 2009) pricing may weaken (as in China); a period of very low prices may not return in the future for governments to follow this approach Adjust when world prices change Stable prices between changes Price changes are large when significantly and subsidies become adjustments are finally made, too costly to bear (Bolivia, Islamic adjustments almost always mean price Republic of Iran, Jordan, gasoline increases, tendency to delay price in Nigeria) increases, lack of predictability, possibility of growing subsidies, politicization of price increases, hoarding in response to rumors of imminent price increases and leading to fuel shortages Adjust when world prices change Stability within the price band If X is relatively large, potentially by more than ±X% (Malawi, large changes when adjustments are Togo) made; possibility of losses exceeding savings within the price band Float prices within a price band, Avoid large price changes Can lead to large subsidies unless smooth changes outside (Chile for price bands are frequently adjusted small and medium consumers, Peru) Set different rules depending on Limit subsidies to times of high world Unless price bands are adjusted from world oil price (China) prices time to time, if world prices remain high, subsidies could grow Agree on the total subsidy Limit the total subsidy bill. Politically difficult to raise prices envelope for the fiscal year and when money runs out (Indonesia) adjust prices, volume, or both accordingly Adjust based on world prices Prices change gradually World and domestic prices could be averaged over past 3–6 months (no moving in the opposite direction, example in this study) inviting political backlash; could lead to large losses if world prices are rising over time. Adjust regularly based on world Tracking world prices well World price volatility quickly prices averaged over 1–4 weeks transmitted. (Dominican Republic, South Africa) Deregulate, subject to anti-trust Market based, no subsidies Downstream petroleum sector needs regulations (Philippines, Turkey) to be competitive or else consumers may be charged high prices; world price volatility immediately transmitted Source: Author and Table A1.1. 12 3. Government Interventions to Influence Prices and Their Consequences Many governments in developing countries are inclined to intervene with price-based policies when world oil prices rise appreciably. In order to limit the drain on the government budget, price-based policies may be accompanied by quantity-based policies in the form of rationing subsidized fuels. Indirect measures to influence prices include export restrictions and pressure brought upon oil suppliers. The end results have not always been lower prices enjoyed by consumers or lower vulnerability to oil price increases. These policy responses and their effects are briefly discussed below. 3.1 Pricing, tax, and export policies A doubling of oil prices since 2005 has led to calls on governments to intervene. Recent oil price surges and collapses have intensified suspicions about “rockets and feathers�—when oil prices rise, retail prices rise quickly like a rocket, but when oil prices fall, retail prices fall slowly like a feather (Bacon and Kojima 2010b)—and prompted some governments to tighten price control or launch investigations into price collusions. Price control Price freezes for months or even years at a time continue to be common in a large number of countries. Predictably, nearly all have led to price subsidies, some amounting to a few percentage points of GDP. Countries that have frozen prices of gasoline, diesel, or both for several months or longer in the past three years include Angola, Bangladesh, Bolivia, Cameroon, Côte d’Ivoire, Egypt, Ethiopia, Ghana, India, Indonesia, the Islamic Republic of Iran, Iraq, Jordan, Kazakhstan, Madagascar, Malawi, Malaysia, Morocco, Mozambique, Nepal, Niger, Nigeria, the Russian Federation, Rwanda, Sri Lanka, Syria, República Bolivariana de Venezuela, and the Republic of Yemen. Among them, Malawi is rare in that it suspended automatic price adjustments in 2004 but resumed them in June 2012. Jordan also resumed monthly price adjustments in December 2012 after suspending them at the end of 2010. No price freeze is permanent—although prices in República Bolivariana de Venezuela have not changed since 1999—and when prices are finally adjusted, the increases can be large, as in Bolivia and the Islamic Republic of Iran in December 2010 and Nigeria in January 2012. Such price shocks can invite a backlash. In the face of widespread popular protests, the government of Bolivia reversed the price increases completely after five days. In 2012, the Iranian parliament amended the Targeted Subsidies Reform Act, ratified in March 2010, to limit future price increases by changing one stipulation in the act: the original act required domestic prices to be raised to “no less than 90 percent� of Arab Gulf FOB prices, but this clause was rewritten to read “no more than 90 percent,� thereby turning a floor into a ceiling and effectively entrenching a permanent subsidy (Hassanzadeh 2012a). Nevertheless, among the three countries, the Iranian price increases of December 2010 were the only ones that were not rolled back. Nigeria deregulated the price of gasoline in January 2012, causing retail prices to more than double. Immediately after the price increase, trade unions staged an eight-day strike, estimated to have cost the economy more than US$1 billion (Reuters 2012a). The government backed down and lowered the gasoline price to ₦97 (US$0.61) a liter within two weeks. Despite the partial roll-back of the initial price increase, ₦97 still represented a 49-percent price increase and the price of gasoline in Nigeria is higher than the higher of the two prices of regular gasoline in the Islamic Republic of Iran. 13 Some governments set target maximum prices informally and adjust taxes to keep fuel prices below the maximum. Two examples are the Lao People’s Democratic Republic and Thailand, which have attempted to keep the price of diesel below 10,000 kip (US$1.25) and 30 baht (US$1) a liter, respectively. Some previously deregulated markets have re-introduced a measure of price control. Concerned that oil companies may be over-charging, the government of Kenya in December 2010 began setting maximum retail prices every month for gasoline, diesel, and kerosene by location. Similarly, Tanzania in 2009 began setting maximum retail prices for gasoline, diesel, and kerosene by location and one maximum wholesale price across the country for each fuel. Oil funds for smoothing or lowering prices Colombia, Malawi, Morocco, Nigeria, Peru, Thailand, and Vietnam manage oil funds for lowering prices in times of high world prices. Ghana’s ex-refinery differential also operates like a price stabilization fund, and Argentina has a fund for LPG. The funds in Malawi and Peru have clear rules for transferring money to and from the funds, while others, such as the one in Colombia, have no rules (Cárdenas Valero 2010). Price stabilization funds are supposed to be self-financing over time. The government reduces domestic prices when world prices are higher than some ceiling threshold, and maintains domestic prices at the floor when world prices are below a predetermined floor threshold. The costs of support in periods of high world prices are meant to be balanced against additional receipts in times of low world prices. In practice, all of the funds in the study countries have receive budgetary transfers, or, in the case of Thailand, have had to borrow heavily commercially. The funds in Peru and Colombia are two examples of budgetary transfers. The government of Peru deregulated the sector in 2004, but set up a fund for an initial period of 120 days in May 2004, and has not been able to retire the fund since. Budgetary transfers to the fund between its inception and the end of 2011 totaled US$2.5 billion (Central Reserve Bank of Peru 2012 and earlier notes). The fund in Colombia began operating in 2008 with an initial deposit of about US$170 million. By the end of 2011, the deficit had grown to 2.35 trillion pesos, or US$1.2 billion (Portafolio 2012). The fund that seems to have required the greatest budgetary transfers is the Petroleum Support Fund in Nigeria. The fund was established in January 2006 to stabilize the domestic fuel prices. With the Central Bank of Nigeria as the custodian of the fund, the fund follows the principles of under-recoveries to be reimbursed and over-recoveries to be paid into the fund (PPPRA 2009). The fuel subsidy subsidized from the fund and ultimately by the government budget increased six-fold between 2006 and 2011 and surpassed US$11 billion in 2011 (Nigeria 2012). Price subsidies and reductions in taxes and other charges About two-thirds of the study countries have kept domestic prices below market-clearing levels for one or more fuels in the past three years, subsidizing consumers. The government paid for the subsidy in every case through budgetary transfers, tax expenditures, or lower corporate tax revenues on account of financial losses suffered by oil companies. Subsidies or cumulative arrears owed to state-owned refineries in recent years have risen to several percentage points of GDP in countries such as Angola, Bolivia, Cameroon, Indonesia, Jordan, Malaysia, Morocco, Nigeria, and the Republic of Yemen. Although not as large as a percentage of GDP, the 14 government’s share of fuel subsidies in India has also been considerable. Once the additional burden-sharing by oil and gas companies are included, the combined sum amounts to about 2 percent of GDP. Universal price subsidies are common, as are tiered prices by consumer category. Subsidized fuels may also be rationed. Setting different prices by end use is most common for LPG, where the distinction may be between automotive LPG and LPG sold in small cylinders for household use, and between LPG sold in small cylinders (typically smaller than 15 kg but as large as 48 kg in Thailand) for residential consumers and LPG sold in large cylinders or in bulk for other consumers. The differences in unit prices have been as large as 280 percent favoring LPG sold in small cylinders in India, 220 percent in Tunisia, 175 percent in Indonesia, and 170 percent in Thailand. In deregulated markets, unit prices decline with increasing cylinder size, because of large economies of scale in bottling and distributing LPG (Kojima 2011, 42−44). Price differentiation by use for gasoline, diesel, and kerosene also exists. Lower-priced diesel tends to be reserved for public transport, agriculture, and fisheries, and lower-priced gasoline for public transport and fisheries. These discounted fuels are typically rationed to discourage diversion. Lower-priced kerosene is almost always for households. Examples include subsidized kerosene for household use in India, two prices for the same grade of gasoline and diesel in the Islamic Republic of Iran, diesel for fishing boats in Malaysia, diesel for farmers in Kazakhstan and Russia, diesel for passenger transport in Peru, diesel for buses in Sri Lanka, and diesel for those consuming less than 4,000 liters a week in Nepal. An interesting case is the Green Fuel project in Thailand, which state-owned PTT (formerly Petroleum Authority of Thailand) launched in 2002 in response to fuel smuggling into the country. The project provides tax-free diesel, dyed green, to fishing boats to reduce incentives to use smuggled fuel. The Excise Department in 2010 stated that boats using green fuel were required to be fitted with a tracking device using a global-positioning system to monitor their whereabouts (Thai News Service 2010b). Another way of lowering prices is to reduce taxes and fees levied. Tax cuts tend to be ad hoc, except in Chile which has formalized rules for adjusting the specific fuel tax to smooth end- user prices for small and medium-size consumers. Brazil, China, the Dominican Republic, El Salvador, Kenya, the Philippines, Rwanda, Senegal, Thailand, and Vietnam have all reduced taxes to lower end-user prices. Several reasons are cited for providing fuel price subsidies, and helping the poor is always among them. In practice, universal price subsidies—even if they are available only to households—have been shown time and again to benefit the rich disproportionately. For example, studies of petroleum product subsidies in 13 countries consisting of eight in Sub- Saharan Africa, three in Latin America, Bangladesh, and Jordan show that, on average, the top two expenditure quintiles captured more than 60 percent of universal price subsidies (Coady et al. 2010). When diversion of subsidized fuels set aside for households—such as kerosene and LPG—is taken into account, petroleum product price subsidies become even more regressive, although when confined to household consumption only, kerosene subsidies have been found to be least regressive (Bacon and Kojima 2010a, 75–79; Kojima 2011, 28–30). Subsidies borne by fuel suppliers In most countries with fuel subsidies, fuel suppliers bear some costs because reimbursements are seldom delivered immediately, or even at all, and fuel price increases are 15 frequently delayed. Oil companies may also be asked explicitly to carry some of the costs of subsidizing consumers. Under such circumstances, a vertically integrated oil company can use upstream profits to cross-subsidize downstream losses. Companies such as Shell Argentina and Esso Petrolera Argentina that operate only in the downstream segment have no upstream profits to cross-subsidize losses and face greater difficulties. Some governments have negotiated price discounts with oil companies for certain consumers. The government of the Philippines in 2003 forged an agreement with oil companies to offer a discount on the price of diesel sold to public transport companies (Bacon and Kojima 2006); the discount program is continuing today. In Russia, the government over the last several years has “recommended� that oil companies sell diesel at a discount to farmers twice a year. For the first agricultural season of 2012, the price discount offered was 30 percent, up from 10 percent in 2010 and 2011 (Platts 2012c). Through “voluntary� price agreements, the government of Argentina for years has put constant pressure on oil companies not to increase prices. Earlier examples of the steps taken by the government are described in Bacon and Kojima (2006, 191–195) and Kojima (2009, 35). Since then, similar actions by the government have continued. In August 2010, the government ordered oil companies to roll back price increases and again threatened to apply the 1974 Law of Supply―which allows the imposition of fines or imprisonment of company executives in the case of shortages of goods, including fuels―following which prices remained frozen until mid- December (IHS 2010e, Reuters 2010c). In January 2012, the government accused oil companies of over-charging cargo transporters, launched an investigation, and later in the month ordered the companies to lower diesel prices for both cargo and passenger transport companies (Platts Oilgram News 2012b). Some national oil companies have paid high prices to subsidize consumers, leading to large losses. On account of price freezes to help combat inflation, Petrobras in Brazil has suffered large refining losses; most recently, its refining, transportation, and marketing division reported an annual loss of US$17.5 billion in calendar 2012 (Petrobras 2013). The recent decline in the company’s financial performance, including its first quarterly loss in 13 years posted in August 2012, has been blamed in large part on low domestic fuel prices (Economist 2012). In China, despite the new pricing mechanism introduced in January 2009, price adjustments have not adhered strictly to the formula, causing large losses to the refining industry. PetroChina and Sinopec, two largest refiners in the country, reportedly suffered combined losses of 96 billion yuan (US$15 billion) in 2011 and 42 billion yuan (US$6.6 billion) in the first half of 2012 (Wall Street Journal 2012; Platts Oilgram News 2012c; Xinhua News Agency 2012e). India’s three state-owned oil companies supplying subsidized fuels reported combined losses in excess of Rs 405 billion (US$7.5 billion) in the first three months of fiscal 2012/13 starting in April (Reuters 2012d). Export restrictions Export restrictions reduce domestic prices, with negative consequences for the oil companies and for neighboring countries to which the petroleum products are exported. Argentina, Bolivia, China, Kazakhstan, and Russia are among the countries that have high export taxes, low domestic crude oil prices, or have banned exports. Export bans are prompted by fuel shortages, which in turn arise mostly from artificially low domestic prices. 16 In the face of serious fuel shortages, Russia increased export taxes on petroleum products steeply in 2011. The export tax on gasoline in May and June 2011 corresponded to nearly US$50 a barrel, effectively acting as a de factor export ban, with serious adverse effects on Kazakhstan, Mongolia, Tajikistan, and other importers from Russia. Kazakhstan in recent years has banned exports of light petroleum products annually for about six months at a time to deal with fuel shortages during the agricultural season. A temporary ban that began in May 2010, however, has been repeatedly extended to the end of June 2013. China imposed a temporary ban on diesel exports in 2012. 3.2 Impact on supply and demand Policies intended to help consumers by keeping prices low have had negative consequences on supply in a number of countries. Commercial malpractice―black marketing, diversion to ineligible consumers who are otherwise required to pay higher prices, fuel smuggling, fuel adulteration, and short-selling―and fuel shortages are two of the most common negative outcomes of governments’ efforts to keep domestic prices low. In the extreme, low prices have made the downstream oil business not financially viable, retail outlets have run out of petroleum products altogether, or have even shut down. At the same time, artificially low prices have done little to discourage inefficient or nonessential fuel consumption, and large price differences for otherwise similar fuels have distorted consumption patterns. Lack of essential investment and disinvestment The combination of total lack of competition due to their monopoly status and negotiating subsidy repayments, capital expenditures, or both with the government has harmed government-owned refineries in the Islamic Republic of Iran, Iraq, Mexico, and Nigeria. As a result, all are major net oil exporters but have had to import some or significant amounts of petroleum products at world prices and sell below costs of supply. One consequence is that refinery rehabilitation and expansion plans have languished for lack of capital, and shortages of fuels at subsidized prices, or even of fuels at any price, have occurred except in Mexico. In March 2010, it was reported that some 3,500 filling stations in Argentina had closed since 2005 on account of poor profitability (IHS 2010d). In India, the largest private oil company, Reliance Petroleum, closed down all of its 1,432 filling stations in 2008. Earlier, in 2005, Essar Oil had closed all of its 1,250 filling stations (Kojima 2009). Essar has since re- opened its retail outlets. Fuel shortages Although not related to pricing policies, events outside the country (such as those in transit countries), events outside the petroleum sector (especially power), or protection provided to inefficient domestic refineries can lead to fuel shortages. Two land-locked countries—Rwanda and Uganda—rely on Kenya as a transit country for fuel supply, and supply disruptions in Kenya are inevitably transmitted to these markets (see Kojima 2009 for earlier examples). Power shortages in Kenya have shut down refinery and oil pipeline operation, leading to fuel shortages in all three countries. Power shortages also increase demand for diesel for backup power generation, and diesel fuel shortages can occur if the demand increase is large enough. In Zambia, where the sole domestic refinery is protected with high import tariffs, unscheduled or 17 longer-than-planned refinery closures for maintenance and repair have frequently led to fuel shortages. Fuel shortages are far more common when fuel suppliers cannot fully recover costs with reasonable returns and cut back on fuel acquisition and sales, or when they decide to pursue higher-return opportunities elsewhere, such as exports, diversion, and out-smuggling. Shortages have occurred in many countries with artificially low prices, including Argentina, Bangladesh, Cameroon, China, Egypt, Gabon, Ghana, India, Indonesia, the Islamic Republic of Iran, Iraq, Kazakhstan, Malawi, Mozambique, Nepal, Nigeria, Pakistan, Russia, Senegal, Syria, Togo, and the Republic of Yemen. In extreme cases, oil companies are no longer able to pay to buy crude oil or petroleum products. In Malawi, by early 2011, black-market fuel prices were reported to be more than double official prices. The finance minister told the parliament that commercial banks did not honor letters of credit on time because foreign exchange was scarce (IHS 2011b). Crippling fuel shortages forced rationing and some drivers resorted to parking overnight at filling stations to secure a place in the queue. In July 2011, 19 people were killed and scores injured when demonstrations broke out throughout the country, protesting shortages of fuel and foreign exchange (Guardian 2011a; AFP 2011b). Nepal’s sole importer, Nepal Oil Corporation, has had difficulties paying Indian Oil Corporation, prompting the latter to withhold delivery and causing fuel shortages. Senegal experienced a prolonged LPG shortage in early 2009, caused by the inability to pay for imports due to mounting subsidies. The shortage doubled the unofficial price of LPG and also pushed up the price of charcoal, which competes with LPG in that market (IHS 2010g; Global Post 2011). By 2011, the Republic of Yemen was no longer able to obtain credit to buy petroleum products on the open market, leading to serious fuel shortages and prompting Saudi Arabia, Oman, and the United Arab Emirates to donate oil (International Oil Daily 2011; IHS 2010a). Even when there is no explicit policy of subsidizing fuel prices, disagreement over controlled prices may lead to shortages. In August 2011 in Tanzania, for example, disagreement over price levels prompted oil marketing companies to stop selling and the government threatened to revoke their licenses. The government increased prices 12 days later (Platts 2011f). Fuel shortages can invite panic buying and hoarding, worsening the shortages. Even when supplies are adequate, rumors or prospects of imminent price increases may prompt panic buying by consumers while sellers hold back selling. If a pricing mechanism is based on an average over a fixed period of time of benchmark world prices and adhered to strictly, it might be relatively easy to predict when the next round of price increases is likely to occur. The Xinhua News Agency (2012a) has partially blamed hoarding by refiners and traders before price increases for fuel shortages. This behavioral response to the price adjustment mechanism is said to be one of the reasons the government of China is reconsidering the current formula. Where fuel prices are adjusted infrequently, rumors of a price hike could be even more damaging because the public would fear a large price increase. In January 2012 in Egypt, panicked motorists—forming long lines when rumors about a price increase spread—were blamed for serious fuel shortages (AFP 2012a). Consumers fighting over scarce fuel supplies have led to scuffles, injuries, and even deaths (Egypt Independent 2012a, 2012b). Fuel shortages can get to the point where some consumer groups start asking governments to remove fuel price subsidies. This occurred in Ghana, where the expansion of the 18 automotive LPG market and large price subsidies have both been blamed for acute LPG shortages, prompting commercial LPG vehicle drivers to ask the government for subsidy removal so as to ensure reliable supply (All Africa 2011e). Ghana raised the price of LPG by 50 percent in February 2013. Abuses Commercial malpractice is one of the most common outcomes of price control that keeps prices artificially low. A news report from Nigeria offers an illustration. The report cites five illegal alternative markets for subsidized kerosene, the price of which has been kept at about one- third of the market price to help poor households with lighting and cooking (All Africa 2011d): 1. Much higher prices of kerosene on the black market 2. Adulteration of diesel with kerosene 3. Diversion of subsidized kerosene for household use to the aviation fuel sector 4. Out-smuggling to neighboring countries 5. Presenting subsidized kerosene as having just been imported to claim the subsidy reimbursement for the second time Governments around the world have tried chemical markers, color dyes, and tracking of delivery trucks to stem adulteration of diesel with kerosene. Unlike addition of kerosene to gasoline, which can be fairly readily detected by vehicle drivers unless kerosene is added in small quantities, large amounts of kerosene can be added to diesel fuel without immediate detection. In South Africa, where there is a price difference of about US$0.30 a liter between kerosene and diesel, there is a levy charged to diesel for a dye added to kerosene to distinguish it from diesel. Similarly, the Petroleum (Amendment) Rules of 2000 in Kenya stipulate that all fuels intended for export and illuminating kerosene for domestic sale be chemically marked. However, color dyes can be removed, effective use of chemical markers requires tests, and all detection procedures require honest and competent inspectors who will not be tempted to overlook violations for informal fees. Perhaps just as important, if financial returns are sufficiently high as to attract organized crime, whistle blowers may even be physically threatened. In India, several murders have been linked to exposure of diversion of subsidized kerosene (Hindu 2011; Hindustan Times 2011). Ultimately, as long as the price of kerosene is markedly lower than that of diesel, commercial malpractice will occur. Comparison of kerosene and diesel prices in July 2012 in 44 of the study countries shows that kerosene was much cheaper than diesel in nearly one-third of the countries (Table 6). In Bangladesh, Nepal, Tanzania, and Vietnam, which at one point in time in the past priced kerosene below diesel but have equalized them since, kerosene consumption fell and diesel consumption rose markedly immediately after price equalization, strongly suggesting that cheaper kerosene was indeed being added to diesel. Table 6: Ratio of retail prices of kerosene to diesel in July 2012 Ratio of kerosene to diesel prices Number of countries with price ratio in given range Minimum Maximum Median <0.5 0.5–0.75 0.75–1.0 ≥1.0 0.30 1.22 0.85 3 10 18 13 Source: Figure A3.5 in Appendix 3. Fuel smuggling is a serious problem in a number of countries. Notable examples of countries battling out-smuggling include Angola, Bolivia, Egypt, Ghana, Indonesia, the Islamic 19 Republic of Iran, Iraq, Malaysia, Nigeria, Reública Bolivariana de Venezuela, Vietnam, and the Republic of Yemen. As with diversion and adulteration, financial incentives for smuggling are so powerful that it is difficult to control it. Steps to curb it include raising prices substantially along the borders in the Islamic Republic of Iran and República Bolivariana de Venezuela, provision of subsidized petroleum products by República Bolivariana de Venezuela to Colombia, expropriation of retail outlets accused of smuggling in República Bolivariana de Venezuela, and restrictions on fuel purchase along the borders in Malaysia. A related problem is fuel tourism, where drivers in other countries cross the border to refuel to exploit differences in taxes and subsidies. In Argentina, filling stations near the Brazilian border list two different prices for gasoline, one for cars with Argentinian license plates and another one for foreign plates, to restrict Brazilian drivers from buying cheaper fuel in Argentina (Energypedia). Since 2009, Bolivia has been charging international prices, set every quarter, to vehicles with foreign license plates. Malaysia’s restrictions on fuel purchase―a maximum of three quarters of a tank for refill for Singaporean license plates and 20 liters within a 50-kilometer radius for other foreign license plates―also target fuel tourists. At the opposite end of the spectrum are those markets into which fuels are smuggled. In 2009, citing a study, Petron Corporation in the Philippines said that fuel smugglers were controlling one-third of the petroleum market, resulting in an annual government revenue loss of ₱30–35 billion (US$630–730 million) (HIS 2009). A country surrounded by lower-price neighbors would find it particularly challenging to reform price subsidies, which would increase the price differences further and enhance the incentives for in-smuggling, as happened in Togo in 2009 (IMF 2010). Turkey requires all fuel importers and distributors to add a fixed proportion of a national marker to gasoline and diesel to discourage in-smuggling and adulteration (Platts 2011d). Selling the same product at different prices provides another avenue for making illegal gains. If the price difference is sufficiently large, it may even be more profitable to concentrate on illegal diversion than on the beneficiaries’ main line of business. This is particularly problematic in fisheries where fishing boats are suited to transporting large quantities of subsidized fuel. In August 2012, the government of Malaysia announced that, in order to reduce abuses by fishermen receiving subsidized fuel for their boats, a representative of the Malaysian Fisheries Development Authority would in the future verify each catch landed, and those with insufficient catch would no longer be permitted to buy lower-priced fuel (Borneo Post 2012). The Philippines abandoned a plan for a fuel subsidy scheme for agriculture and fisheries in May 2011, citing difficulties with beneficiary identification (Philippine Star 2011). Electronic monitoring of subsidized fuel purchase has been proposed as one way of combatting illegal purchase of subsidized petroleum products. This could be designed to enable monitoring of all fuel transactions, including information on the vehicle, the customer, the amount purchased, the time of purchase, and the location. The three state-owned companies in India supplying subsidized fuels are automating transactions to curb commercial malpractice (Automation World 2011). Similarly, President Yudhoyono of Indonesia announced in May 2012 that the government was planning to start electronic monitoring of subsidized fuel purchase (Jakarta Globe 2012a), although there has been little progress to date. Diversion of LPG subsidized for household use to the automotive, commercial, and industrial sectors is common. Aside from misuse of subsidy funds, such diversion can pose a serious threat to public safety. LPG cylinders have been known to be chained to cars without 20 proper installation to serve as fuel tanks. Equally dangerous is siphoning off LPG from small cylinders (reserved for heavily subsidized LPG for household use) to transfer it to larger cylinders, a practice that has been blamed for some of the series of LPG cylinder explosions in Indonesia―responsible for at least 22 deaths―in the early stages of kerosene-to-LPG conversion campaign (Platts Oilgram News 2010b; Jakarta Globe 2012b). Claiming subsidy reimbursement also provides scope for corruption. Nigeria’s Petroleum Support Fund provides a recent example. A series of government-led investigations were not able to reconcile US$1.5 billion of reimbursements (All Africa 2013). Publicized cases of large-scale corruption have led to a public perception in some countries that price subsidies are affordable if only they can be implemented efficiently and without corruption. The political debate then becomes focused on how to cut the “fat� out of subsidy delivery, or even how to get rid of corruption in the government in general. The public comes to believe that eliminating corruption will free up funds for subsidies to keep prices of fuel and food low. The scale of corruption also discredits the government’s argument that savings from subsidy removal can be used more productively and equitably, as voiced by a former secretary general of a workers’ union in Nigeria, “Until they stop corruption, all these ideas will not work… Nigeria is rich, we have money� (Guardian 2011b). Inefficiency and environmental impact Ironically, price controls can end up protecting inefficient, high-cost suppliers of petroleum products, resulting in larger subsidy bills when prices are subsidized, and higher prices when subsidies are removed. This is particularly true for refineries. Globally, tightening fuel specifications and a shift away from heavier fractions to white products (gasoline, kerosene, and diesel) have resulted in economies of scale being critically important. In response, deregulated and competitive markets have seen consolidation and closure of small refineries (World Bank 2008a and 2008b). The trend in the United States is informative. In 1982, the Oil and Gas Journal’s “Worldwide Refining Survey� found 301 refineries in the country; by January 2013, the number had declined to 125, with an average size of 145,100 barrels per day (bpd). In the intervening years, 176 refineries—more than half of the refineries that existed in 1982—had been shut down and replaced by fewer, much larger refineries through expansion of existing refineries. Globally, the average size of refineries had increased to 135,800 bpd by 2013. Against this backdrop, to give just two examples, Tunisia and the Dominican Republic have one refinery each of 34,000 bpd with the simplest configuration needed to produce gasoline and other petroleum products. Neither country is landlocked; both are close to major refining centers. If the current policy of strict price control were to be discontinued, exposing both refineries to open competition, it is far from clear that these refineries would be able to continue to operate. In the meantime, the high cost of operating these refineries is ultimately being borne by the government (Tunisia) or consumers (Dominican Republic). Many refineries in Sub- Saharan Africa and other regions are also uncompetitive and high-cost. Essentially all of these refineries have plans to increase capacity and modernize for this reason, but these plans are suffering from years, if not decades, of delay because they cannot attract investment, nor is it clear that it would make sense for refineries with chronic operational inefficiencies to expand. One consequence of uncompetitive refineries is that fuel quality lags behind the EU or U.S. standards, or even the country’s own fuel specifications. For example, in Russia, the inability to meet Euro-3-compliant fuel quality standards which came into effect in January 2011 21 prompted a number of Russian refineries to curb production or increase exports, contributing to acute gasoline shortages in many regions in early 2011 (Energy Economist 2011b). In response, Prime Minister Putin lifted the fuel quality standards on a temporary basis (Financial Times 2011) while simultaneously increasing the gasoline export tax sharply. The timeline for fuel quality standards was subsequently postponed for the third time since 2008, delaying the ban on Euro-2-compliant gasoline and diesel until the end of 2012 (International Oil Daily 2012b), or a full 13 years after Euro 3 standards came into effect in the European Union. The public pays indirectly through higher health costs arising from exposure to greater vehicular exhaust. 4. Steps to Reduce Oil Consumption Reducing oil consumption is one means of decreasing vulnerability to high oil prices. Fuel efficiency improvement, reducing nonessential oil use, and diversifying away from petroleum products can all help lower oil consumption. Where petroleum products are used for power generation, and to the extent that power shortages may require diesel power generation to make up for the shortfall, electricity conservation also contributes to decreasing vulnerability. Table A2.1 in Appendix 2 provides detailed information on energy conservation and diversification for each country. 4.1 Conservation Nearly all governments have energy efficiency improvement and conservation policies, programs, campaigns, or targets. The rigor of implementation, however, varies markedly from country to country. China’s central government sets an ambitious target for reducing energy intensity per unit of GDP every five years and enforces it. Thailand and the Philippines have also been active. Thailand has had energy saving-campaigns for more than two decades. The Philippines has issued a series of administrative orders designed to reduce energy consumption. Many of these measures have been driven by rising energy prices. Prospects of plentiful energy could change the incentive structure. For example, the government of Uruguay approved an energy efficiency improvement program in 2008 and formed a technical group to advise the public sector on the implementation of energy-saving measures, but disbanded the group in 2010 due to plentiful rainfall for hydropower generation (Business News Americas 2010a). One of the most efficient ways to promote fuel conservation is through price signals: the higher the price, the more financially attractive are fuel-efficient appliances, vehicles, and equipment. High prices also discourage nonessential fuel use, such as nonessential car trips. The pricing policies of many study countries militate against this approach. In República Bolivariana de Venezuela, for example, the government has launched energy conservation campaigns, but sharply falling prices of petroleum products and electricity in real terms have presented serious barriers to such efforts. The Department of Energy in the Philippines has been promoting automotive fuel conservation for more than a decade. There is a vehicle-use reduction program as part of national energy efficiency and conservation efforts. The department’s Web site posts fuel-saving driving habits for awareness-raising. There are also initiatives by oil companies to help drivers conserve automotive fuel. Total Jordan in June 2011 launched a program to help customers reduce fuel consumption by checking tires and pumping them if necessary to ensure that they are properly inflated, checking the engine oil level, and offering advice on how to reduce fuel consumption, 22 all free of charge (Trade Arabia 2011). Optimal tire inflation alone can reduce fuel consumption significantly (IEA 2005). Shell has been conducting a Shell FuelSave campaign for some time. The goal of its Target One Million program under the campaign is to help one million motorists around the world drive more efficiently, and the Shell FuelSave Challenge shows drivers what practical steps can help reduce fuel consumption (Shell 2012). As part of the campaign, Shell in 2007, 2009, and 2010 surveyed thousands of drivers in Asia and Europe about their awareness of how driving habits affect fuel economy. The surveys found that drivers in developing countries in Asia were far more aware of, and likely to use, eco-friendly driving habits, and more willing to change their driving habits to save fuel (Shell 2010). Another, although rarer, approach is to set fuel efficiency standards. China has been tightening vehicle fuel economy standards since 2004, and India is in the process of establishing them. Over the medium to long term, fuel conservation should include increasing the transport system efficiency by reducing or avoiding travel or the need to travel and shifting to more efficient travel modes. Urban planning—management of the spatial organization of cities for efficient allocation of urban infrastructure and land use—can encourage a city structure that would minimize travel. Shifting from private motorized trips to efficient, clean, and attractive public transport and from road to rail can substantially reduce fuel use (GIZ 2012). Far more common than fuel efficiency standards are energy efficiency standards and labeling for electric appliances. Efficient lighting programs have been particularly popular. Argentina, Brazil, Bolivia, China, Ethiopia, the Islamic Republic of Iran, Kazakhstan, Malaysia, Mexico, the Philippines, Russia, and Tajikistan have set a timetable, or drafted legislation, for banning manufacture, imports, or sale of incandescent light bulbs, and numerous others have had voluntary exchange programs to replace incandescent light bulbs with compact fluorescent light bulbs (CFLs). Many of these exchange programs have been government-funded, and CFLs are often distributed free of charge in exchange for incandescent light bulbs, which are subsequently destroyed. It is in the interests of every utility company to shave off peak power consumption to reduce capital expenditure. An initiative of the Ministry of Mines and Energy, the Electricity Control Board, and NamPower in Namibia used NamPower’s profits to distribute 900,000 CFLs free of charge in 2007–09 in exchange for five incandescent light bulbs per household (NamPower 2007). Concerned about power shortages, rising costs of electricity generation from petroleum products, or both, several governments have restricted power consumption. Examples include limiting thermostat settings or restricting the use of air conditioning (Bangladesh, Panama, Sri Lanka, Vietnam), restricting street lighting (Jordan), reducing the number of work days (Pakistan), restricting business hours in certain sectors (Pakistan, Panama), and ordering reductions in government consumption of power (Jordan, Sri Lanka, Vietnam). Brazil, Jordan, and Pakistan have introduced daylight savings time in summer. Some utilities and governments have introduced incentives for reducing energy consumption, penalties for over-consumption, or both. Hoping to reduce energy imports, the government of Morocco in 2009 signed an agreement with the private sector to reduce energy consumption to reduce energy imports, and offered a 20-percent bonus for reducing electricity consumption by 20 percent (ISI Emerging Markets 2009). As part of “Today for Tomorrow� national energy conservation program in Sri Lanka, the Ceylon Electricity Board announced in April 2012 that it would provide free electricity for a month to 1,000 consumers―selected 23 through a raffle draw―who reduce consumption by 20 percent, and a 50-percent discount to 5,000 consumers who reduce consumption by 10 percent (Lanka News 2012). Effective July 2011, the government of República Boliviana de Venezuela imposed harsh penalties on those whose consumption was markedly higher than in 2010 (EIU 2011). Restricting oil use is less prevalent. In Kenya, the budget for the fiscal year beginning in July 2009 restricted the engine size of ministerial cars to 1.8 liters, and warned that vehicles not in compliance would be confiscated by September 2009 (Kenya 2009). The Ministry of Finance and Planning of Sri Lanka in February 2012 issued a circular instructing all government institutions to limit fuel and power consumption as a priority (Sri Lanka News 2012b). 4.2 Diversification There are several paths to diversification away from oil: • In the power sector, shift to natural gas, coal, and, above all, renewable forms of electricity such as hydropower, geothermal, solar, wind, and biomass. Fuel costs for hydropower, geothermal, solar, and wind are essentially zero, representing a break from oil prices. World prices of natural gas and coal have been correlated with oil prices, with the exception of U.S. natural gas prices. Between January 2004 and October 2012, correlation coefficients for the spot prices of benchmark crudes (Brent, West Texas Intermediate, and Dubai); FOB coal prices in Australia, South Africa, and Colombia; and natural gas border prices in Japan and Europe ranged from 0.66 (Colombian coal with gas in Japan) to 0.84 (Australian and South African coal with West Texas Intermediate). Coal and natural gas are traded much less than oil on the world market, and these price correlations can be much weaker on many domestic markets. The U.S. natural gas market is a case in point, for which the correlation coefficients with all other fuels are negative. • For heating water, switch to solar water heaters. • Substitute gasoline with bioethanol and petroleum diesel with biodiesel. • Switch from road transport to rail, and from gasoline and diesel to compressed natural gas (CNG). Switching from gasoline to automotive LPG would be less attractive because of strong correlations between oil and LPG prices on the world market. Nevertheless, switching to automotive LPG has been made financially attractive in some markets on account of much lower taxes on LPG, or diversion of subsidized LPG for household use to the automotive market. More than three-quarters of the study countries have set specific targets for renewable energy, mostly to do with power generation (Table A2.1 in Appendix 2). Of the top ten largest CNG vehicle markets in the world, eight are among the study countries. The top two (the Islamic Republic of Iran and Pakistan) account for more than one-third of the world’s total CNG vehicle population, and the top five (top two and Argentina, Brazil, and India) for more than two-thirds. Between 2002 and 2012, the global CNG vehicle population grew at an annual rate of 23 percent (IANGV). Not all markets, however, are enjoying robust growth. Argentina and Pakistan in particular are experiencing serious gas shortages, and the number of CNG vehicles in Argentina has been declining. The governments of Bolivia and the Islamic Republic of Iran have promoted CNG to reduce the consumption of petroleum products, which are heavily subsidized. In contrast, the CNG program in India was launched largely in response to concerns about urban air pollution. 24 Given that gasoline and diesel account for about one-half of oil consumption in developing countries, substituting them with liquid biofuels is viewed as an attractive option. High oil prices, a desire to increase the share of renewable energy and reduce reliance on oil, and support for agriculture and rural development have been the main drivers for growing interest in liquid biofuels as transportation fuels. Ethanol (as a substitute for gasoline) and biodiesel are the two most common liquid biofuels. Straight plant oils (sunflower, palm, coconut) have been used in limited circumstances for power generation and, in rare cases, automotive use. Ethanol is manufactured from sugarcane―by far the most technically efficient route―and starch crops (maize, wheat, cassava) by fermenting sugar. There are large economies of scale associated with ethanol production. Biodiesel, made from reacting methanol with plant oils (soy, palm, rapeseed, Jatropha curcas), is easy to make on a small scale. However, there are economies of scale in making biodiesel that meets tight automotive diesel specifications. Argentina, Brazil, China, Colombia, Ethiopia, India, Jamaica, Malawi, Malaysia, Pakistan, Peru, the Philippines, Thailand, and Uruguay have been blending ethanol in gasoline, biodiesel in petroleum diesel, or both for some time, and Mozambique began mandating blending in 2012. Brazil has the longest history, having authorized blending of 5 percent ethanol in gasoline (referred to as E5) in 1931 and mandating E5 in 1938. In percentage terms, Brazil also has the highest share of ethanol displacing gasoline in the world. Factors contributing to the success of the ethanol program in Brazil have been described elsewhere (Kojima and Johnson 2005; Kojima, Mitchell, and Ward 2007). Plagued by diesel shortages, Argentina aims to eliminate diesel imports and eventually move to B20 (diesel containing 20 percent biodiesel) from the current B5 (Platts Oilgram News 2010a). The economics of biofuels are location- and feedstock-specific. The economics are more favorable where there are high costs associated with importing petroleum products and domestic biofuel feedstocks have low costs, such as a landlocked country importing oil and producing ethanol from molasses, which is made in the process of converting sugarcane to sugar. Malawi, which is landlocked, produces ethanol from molasses and fits this category. The availability of molasses is limited, and for large-scale ethanol production, as in Brazil and Colombia, all of sugarcane juice is converted to ethanol. The economics of ethanol from sugarcane, although technically efficient, have not been favorable in recent years because of soaring world sugar prices. It is important to note that the economics depend on both the price of oil and the price of the feedstock in the alternative market, for example the world price of sugar for sugarcane. The economics of ethanol from sugarcane as a substitute for gasoline are shown in the left panel in Figure 2. Ethanol is economic when the black line is above the gray line. Despite high world oil prices, ethanol from sugarcane has not been economic since October 2008 because of high world sugar prices. Taking the last 13 years since January 2000, globally, ethanol from sugarcane has been economic less than one sixth of the time. Similarly, the economics of biodiesel have been challenging. As the right panel in Figure 2 shows, the opportunity costs of one of the two principal feedstocks (plant oil, the other feedstock being methanol) have been higher than diesel prices. To feedstock costs must be added the capital, operating, and maintenance costs for the manufacturing plant. 25 Figure 2: Economics of ethanol from sugarcane and comparison of feedstock prices for biodiesel 1.8 1.6 1.6 Northwest Europe premium gasoline 1.4 1.4 Gasoline equivalent cost of ethanol 1.2 1.2 1.0 US$ per liter US$ per liter 1.0 0.8 0.8 0.6 0.6 0.4 0.4 0.2 Diesel, Europe Rapeseed oil 0.2 Soybean oil Palm oil 0.0 0.0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Sources: Author’s calculations based on data from World Bank (2013), various issues of USDA (2013), and industry sources. Note: Opportunity costs of ethanol are calculated based on the following parameters used to compute the equivalencies between sugar and ethanol in Brazil: 1.0495 kg of sucrose equivalent to 1 kg of sugar, and 1.8169 kg sucrose equivalent to 1 liter of anhydrous ethanol. Sugar cane is assumed to yield 83 percent sugar and 17 percent molasses. Prices of molasses are assumed to be equal to 25 percent of sugar prices on a weight basis, and the sucrose content of molasses is 55 percent that of sugar. A fuel economy penalty of 20 percent is assumed for ethanol. Sugar prices are raw, FOB, and stowed at greater Caribbean ports. Soybean oil prices are in Decatur, Illinois; rapeseed oil prices are Dutch, FOB, ex-mill; and palm oil prices are for palm oil from Malaysia delivered in Northwest Europe. As a result of weak economics in many parts of the world, most liquid biofuel programs have required subsidies, mandates, or both. The subsidies can be substantial. In Thailand, the total reduction in taxes and charges on E10 for gasoline with 91 RON was US$0.63 per liter of ethanol blended (US$0.06 per liter of blend) in February 2007. By mid-2008, the overall reduction rose to US$2 per liter of ethanol blended, and remained above US$2 in 2012 (EPPO 2012a), or triple the FOB price of gasoline in Singapore. From the point of view of mitigating the adverse effects of high oil prices, a program requiring large subsidies for alternative fuels to combat high oil prices raises questions about efficacy. Another concern is the competition for fertile land and water, which could contribute to food price increases. Concerns about food security have prompted China to ban grains for ethanol production, India to restrict ethanol production to molasses, and South Africa to exclude maize and Jatropha curcas (which is not edible but may nevertheless compete for water and land) from its national biofuel policy (South Africa 2007). In rare circumstances, biofuels are claimed to lower prices. Ethiopia, which makes ethanol from sugarcane, switched from E5 to E10 in March 2011 and lowered the price of gasoline in Addis Ababa by 0.45 birr (US$0.027) per liter. The economics of this move are not clear. Sugarcane cultivation is water-intensive but farmers do not pay for irrigation water, and the government has been subsidizing sugar to keep its price low (Capital 2012). 5. Mitigating Adverse Effects There have been supply-side responses to lower prices paid for oil, as well as helping consumers cope with high oil prices. Among the supply-side measures are fuel price hedging, negotiating price discounts, bulk procurement, other means of lowering supply costs, and 26 promotion of price competition. Assistance to consumers includes price discounts on petroleum products, cash transfers, and other forms of social protection. 5.1 Efforts to lower costs of supply Hedging Fuel price hedging has been widely used by airlines and other companies. Predictably, timing has been the most important determinant of the success of hedging strategies (Bacon and Kojima 2008, chapter 5). As world oil prices began to rise again, the Ghanaian cabinet in March 2010 approved a Commodity Price Risk Management Policy, and the government began hedging gasoline and diesel. This strategy has met with success. Sizable hedging gains in the first half of 2011 paid for fuel subsidies through July, and in 2012 Ghana hedged petroleum products on a quarterly basis (Ghanaian Times 2010 and 2012; IMF 2012b). In 2008 and 2009, companies in other parts of the world reported large losses after previously soaring oil prices rapidly fell in late 2008 and into 2009. To lower costs, many companies chose options that provided some upside if oil prices remained high but did not protect against a price collapse. Airlines in China, Malaysia, Pakistan, the Philippines, and Vietnam were among those reporting hedging losses, in some cases amounting to US$1 billion. The large losses invited governments to raise questions, investigate the hedging contracts signed, and even imprison executives for allegedly acting irresponsibly and causing losses (Market News International 2009; Dow Jones 2010b; South China Morning Post 2011; Platts 2009b; Plus News Pakistan 2010; Philippine Star 2009; Platts 2010). Oil companies have also suffered losses. Arguably one of the most politicized turns of events occurred in Sri Lanka, when the hedging strategy of state-owned Ceylon Petroleum Corporation (CPC) turned sour in 2008. CPC entered into a series of contracts to hedge a portion of its oil imports beginning in 2007, increasing the amount hedged over time to about one-third of oil imports. The other oil marketer in the country, Lanka IOC, also hedged. As long as oil prices were rising, hedging was advantageous, but hedging proved to be extremely costly once oil prices began to crash in the last few months of 2008. The perception that the hedging deals were unfairly structured and that the public was being asked to pay for the hedging losses through higher retail prices and not benefiting from falling oil prices rapidly gained wide acceptance, and petitions to that effect were filed. The cabinet appointed a risk management committee to review all hedging contracts and to minimize the losses in November 2008. The supreme court ordered a temporary suspension of the CPC chairman and payments to the banks until two petitions, alleging fraud and corruption in the hedging deals, had been dealt with. In the end, Sri Lanka’s treasury was exposed to about US$464 million in claims from three foreign and two local banks (Kojima 2009; Reuters 2011a). Price discounts for fuel imports and bulk procurement Some governments and national oil companies have negotiated price discounts with governments and national oil companies in oil-producing countries. Through PetroCaribe, which claims 18 members and 12 joint ventures, República Bolivariana de Venezuela provides petroleum products under concessionary terms to countries in Central America and the Caribbean. In October 2011, PetroCaribe reported delivering 92,000 bpd of crude oil and petroleum products to its members (PetroCaribe 2011 and 2012). State-owned Bangladesh Petroleum Corporation negotiated favorable payment terms for fuel oil with Malaysia’s national 27 oil company Petronas and Philippines National Oil Company in 2011 (Reuters 2011c). Iraq has historically provided Jordan with price discounts for a limited amount of crude oil and fuel oil. Unable to purchase oil for lack of cash, the Republic of Yemen has been given free crude oil and petroleum products from Saudi Arabia, Oman, and the United Arab Emirates (Yemen Times 2012; Reuters 2011d). The rationale for bulk procurement is that unit costs fall with scale. Government- mandated bulk procurement, however, has met with mixed results. Mozambique since the 1990s, Kenya since 2004, and Tanzania since January 2012 have implemented bulk procurement. In Kenya and Tanzania, there is an open tender organized by the government at regular intervals. In Mozambique, Imopetro, an oil industry consortium, imports petroleum products. Questions have been raised on and off in Kenya about whether its bulk procurement system actually results in cost savings. In May 2011, the Ministry of Energy reportedly blamed high fuel costs on the refiner’s needing to go through a third party to procure crude oil and manipulation of the crude oil price by traders who alter the date when crude oil enters the country (BMI 2011). In Tanzania, questions have been raised about the same company winning the first three tenders in succession and importing gasoline failing to meet fuel specifications, which reportedly damaged vehicles (Tanzania Daily News 2012). A similar incident involving imports of contaminated gasoline prompted the government of Mozambique to give the state oil company a 51-percent stake in Imopetro in 2011 (All Africa 2012c). Private companies have also considered bulk procurement. In January 2012, the African Airlines Association 2012 announced the Joint Fuel Purchase Project, with participation of airlines from nine Sub-Saharan African countries (AFRAA 2012). Strengthening infrastructure for fuel imports, storage, and transport Expanding the port capacity to receive liquid fuels in greater quantities or increasing the speed of unloading, increasing fuel storage capacity, and enabling cheaper transport of petroleum products (by pipeline or rail rather than road transport) are some of the ways to lower costs and fuel prices. Shortening the time to unload imported fuels will slash demurrage charges and relieve port congestion, with positive economy-wide effects on both accounts. Some countries, especially those in Sub-Saharan Africa, suffer from inadequate fuel storage capacity, leading to fuel shortages and hence higher prices, and underutilization of rail and pipeline transport due to the rundown state of the infrastructure, all of which exacerbate the adverse effects of high world oil prices (Kojima, Matthews, and Sexsmith 2010). Among the study countries, China has proceeded furthest in establishing strategic reserves. In the first phase of the program, China managed to fill 103 million barrels of crude oil storage at a cost of about US$60, and is working to build 169 million barrels of storage by 2013 and 228 million barrels by 2016. Guidelines published in 2011 call for commercial stocks of petroleum products and allowing local governments to look into setting up local diesel reserves (Xinhua News Agency 2011). In December 2011, a senior official in India said that the government was planning to build strategic petroleum reserves of nearly 18 million tonnes (about 130 million barrels) by 2020, expanding on a 5.3-million-tonne stockpile, the storage tanks of which were under construction, to be used in case of supply disruptions or large price increases (Dow Jones 2011d). Kenya in 2008 issued regulations, stipulating minimum operational stockholding of 25 days for gasoline, 20 days for diesel and kerosene, and 15 days for LPG (Kenya 2008). Under 28 consideration are plans in Malawi, Mongolia, Rwanda, and Zambia to increase storage capacity (MERA 2010; Dow Jones 2012a; All Africa 2012b; All Africa 2011a). Minimum stockholding requirements are often not enforced for cost reasons. In theory, a small fee can be levied on each fuel to finance construction of additional storage capacity and its management, but governments are reluctant to increase costs of supply and add to world oil price increases. The government of Togo acknowledges that the country has little storage capacity but does not have the financial means to expand it (Togosite 2011). Uganda’s only reserve storage facilities for gasoline and diesel in Jinja, in need of rehabilitation, have been empty since 2006 (Dow Jones 2011c). At the opposite end of the spectrum are policies outside the petroleum sector that can amplify price increases. For example, in late 2010 in China, severe diesel shortages forced thousands of filling stations to shut down and others to ration, as firms turned to diesel power generation when power was rationed to meet the energy intensity target in the 11th Five-Year Plan (2006–10). Power tariff subsidies, which lead to financial difficulties for utilities resulting in insufficient operating capacity for generation, transmission, and distribution, have led to similar scenarios. Promoting price competition Where prices are not controlled or only price ceilings are set, the government can promote price competition by making information available. The price information needs to be broken down by company, and preferably by filling station. In addition, it is important to promulgate and enforce a rule that requires prices to be posted on display boards at readable heights that are clearly visible to drivers. Some governments post detailed information about fuel prices to help consumers. Some list current prices only, others post recent but not current prices, and a handful lists both current and historical prices. Among the most detailed and timely is the online price database in Chile— mandated by a resolution issued in January 2012—which is also available on iPhone, BlackBerry, and Android. The database gives viewers the choice of displaying data in order of increasing or decreasing price and the address of each filling station, prices, and the date and time of the last price change. The government of Guatemala highlights on its Web site the filling stations with the lowest prices in the Guatemala City Metropolitan Area with their addresses and street maps every week. Instituto Nicaragüense de Energía (Nicaraguan Institute of Energy) surveys about 75 filling stations in Managua every week and provides details on the three highest-priced and three lowest-priced filling stations. The Authority for Consumer Protection and Competition in Panama, proclaiming “an informed consumer has power,� collects and posts gasoline and diesel prices at filling stations every four weeks, highlighting those with low prices. The Ministry of Economy in El Salvador until 2012 was posting lowest prices in three parts of the country as saving tips. Argentina, Pakistan, Peru, and the Philippines also post detailed price information by company. For price competition to benefit consumers, however, it is important that there be effective monitoring and enforcement of technical standards, or else a competitive fuel market can lead to partial or total product degradation, with a low-quality product (adulterated, mislabeled, or short-weighted) driving out a high-quality product. 29 5.2 Assistance to consumers Several governments have made use of targeted subsidies and tax reductions to help consumers, usually aimed at agriculture, public passenger transport, goods transport (such as for the trucking industry), and fisheries. Examples of having multiple prices for the same fuel by user category are discussed in section 3.1. As the case of provision of subsidized fuel to fishing boats in Malaysia illustrates, however, even rationing subsidized fuel using smart cards has had limited success. Unlike electricity or piped natural gas, there are few examples of well-executed targeted fuel price subsidies for liquid fuels because they are easy to transport and distribute, making it virtually impossible to stop diversion and black market sales. Instead of subsidizing prices, an alternative is to provide cash and other forms of assistance to consumers of petroleum products. Cash subsidies have been provided to agriculture, public transport, and fisheries in Bangladesh, China, and the Philippines (Bangladesh 2012b, China Daily 2012, Xinhua News Agency 2012d, Philippine Daily Inquirer 2012). Cash transfers to households are offered in El Salvador for LPG (El Mundo 2011), in Sri Lanka for kerosene as part of the national poverty alleviation program (Central Bank of Sri Lanka 2012), and in Syria for heating oil (IHS 2011a). In El Salvador, the government in August 2011 began depositing the cash through the electricity bill. Other examples of assistance include transport vouchers in Mozambique (IMF 2011c) and a utility subsidy program for low-income households in Thailand, which includes free rides on non-air-conditioned public buses and third-class trains. Targeted cash transfers are generally considered among the best means of compensation for petroleum product price reform. Unlike targeted price subsidies, which can have large leakage and introduce market distortions, cash transfers leave market forces largely alone while enabling the poor to cope with multiple shocks. This is not to say that cash transfer programs face few administrative difficulties—beneficiary identification and timely delivery in full amounts are arguably the top two challenges. In addition, some fuels are merit goods when used for cooking or heating: compared to combustion of solid fuels in traditional stoves, kerosene in high-pressure stoves and LPG substantially reduce indoor air pollution, thereby improving health, and also eliminate the time spent on biomass collection. Given cash, however, households may choose to spend it on what they regard as more pressing needs and switch to biomass for cooking, because they do not fully value the health and time-saving benefits of using cleaner- burning fuels. One of the best-known cash transfer programs to mitigate adverse effects of large oil price increases is that in Indonesia after the government raised the prices of gasoline, diesel, and kerosene sharply in 2005. Rp 100,000 (US$11) a month was delivered to more than 19 million households starting in October 2005 through the national postal system for a total of Rp 1,200,000 (US$128) in four tranches. The program was intended to help the poor and the near- poor adapt to the adverse effects of higher oil prices by distributing cash over one year. A review found that the top four expenditure items using the cash transfers were rice, kerosene, debt repayment, and health, in that order. After more moderate but still significant price increases in May 2008, the government again implemented cash transfers of Rp 100,000 (US$10) a month to 18.5 million households starting in June 2008, this time for a total of nine months in three tranches. Some households switched back to biomass from kerosene for cooking, in part because kerosene was more expensive and also because of kerosene shortages (World Bank 2012a; Widjaja 2009; Satriana 2009). 30 Partly on account of compressed preparation and delivery schedules, implementation of the two temporary unconditional cash transfer programs in Indonesia encountered several problems and invited complaints, of which the top three most commonly voiced were the lack of transparency in beneficiary selection, unfair distribution, and assistance given to those who were not eligible. Informal levies were extracted from the cash being transferred, amounting to a sizable fraction of the benefits. The frequency of deductions increased from about 10 percent in 2005–2006 to 50 percent in 2008–2009. These problems notwithstanding, against the history in Indonesia of sometimes violent and sweeping opposition to fuel price increases in the past, these just-in-time cash transfers have been widely credited for the price increases in 2005 and 2008 meeting with few protests. This is all the more remarkable given the first program was designed and deployed in less than five months. Nearly two-thirds of the total benefits went to the bottom 40 percent of the population. The recipients showed slightly improved education, labor, and health outcomes (World Bank 2012a). Untargeted cash transfers can be costly. The Iranian economic reform of December 2010 saw the prices of petroleum products, natural gas, and bread, and electricity and water tariffs increase sharply. The Targeted Subsidies Reform Act as ratified in 2010 limited compensation cash transfers to households to a maximum of 50 percent of the net proceeds from the implementation of the law, but the government in the end transferred more than double the legal limit by the end of 2011: the government handed out RIs 455,000 (US$43 at the official exchange rate in 2011) per person per month to about 73 million Iranians for a total of more than RIs 40 trillion (US$3.8 billion), against the total savings from all price increases of about RIs 30 trillion (US$2.8 billion). The law envisaged only half of the savings going to households, 30 percent to compensate industries and help them improve energy efficiency, and 20 percent for other government programs and infrastructure investment. In the end, the government used all of the savings from price increases, took out loans from the Central Bank, and used other sources of revenues to pay for the cash transfers (Hassanzadeh 2012a). That said, the cash transfers, combined with proactive communication by the government, undoubtedly helped minimize political opposition to the very large price increases implemented across several sectors in December 2010 (Guillaume, Zytek, and Farzin 2011). The very poor with no electricity have virtually no choice but to use kerosene for lighting, and, depending on the magnitude, may be seriously affected by a kerosene price increase. The ultimate mitigation in this context is connecting these households to electricity, which may also enable them to engage in new income-generating activities. Indeed, using savings from subsidy reduction to expand rural electrification was an important component of the mitigation package in Ghana when fuel prices were increased significantly in February 2005 (Coady and Newhouse 2006). 6. Observations Some countries that deregulated the downstream petroleum sector years ago continue to operate with little government interference, notably Turkey, which deregulated prices in 1989. Argentina, which deregulated prices in the same year, has chartered a different course and the government remains heavily involved in controlling the oil sector. The petroleum sector in the Philppines has remained deregulated since 1998, although the government has been more active in influencing prices than in Turkey. Kenya and Tanzania have introduced a measure of price 31 control by reverting to price ceilings, reflecting concerns about lack of adequate price competition. The political challenge of keeping up with world oil price increases is evident in policy reversals found in this study―many governments that adopted automatic pricing mechanisms earlier have suspended adjustments, in the case of Cameroon following deadly protests (AFP 2008). These political difficulties have been compounded by rising food prices: between January 2004, when world oil prices began to soar, and January 2013, energy and food prices on the world market rose and fell in tandem, with a correlation coefficient of 0.89. Where they occurred, public protests were often against both high fuel and food prices. Some governments, such as Egypt and the Islamic Republic of Iran, faced not only growing fuel subsidy bills but also rising food subsidy bills. This study found that government control of the downstream petroleum sector and its interactions with policies in other sectors have led to a variety of negative consequences that were replicated in a wide range of countries: • Fuel shortages are common. They have economy-wide effects, and at times tragic human consequences. In Egypt, fights over fuel in short supply have resulted in injuries and deaths. • National oil companies with monopoly over refining and other segments of the downstream sector have often suffered from decades of chronic inefficiencies as well as having to shoulder the burden of fuel subsidies. One outcome is that major oil exporting countries with the requisite scale economy were forced to import petroleum products ―because of mismanagement and subsidies that have decapitalized their refineries―at world prices and sell below costs on the domestic market. Some have run out of cash reserves altogether and at times could not pay for fuel imports, leading to acute fuel shortages and high prices. The situation is aggravated by the obligation placed on the national oil companies to supply petroleum products to government entities that do not pay on time and have accumulated large debts. Among the heaviest debtors are state- owned power utilities, which are themselves heavily indebted because of subsidized power tariffs. • Protection of government-owned refineries that are uneconomic has pushed up domestic prices, increased subsidies, or both, all too often leading to fuel shortages. • The monopoly status granted to national oil companies or protection accorded to government-owned refineries often arises because of subsidies: governments wish to channel subsidies through one entity rather than numerous actors in order to exercise greater control over subsidies. But years or decades of not having to face any competition have made these operators inefficient, raising costs, with opaque governance. • Even where there are several large private oil companies operating, keeping domestic prices artificially low tends to decapitalize the downstream sector. One consequence is a large lag in the introduction of tighter fuel specifications to enable more stringent vehicle emissions standards, as in Russia. • Price control interferes with efficiency improvement. Typically based on a cost-plus formula, ensuring reasonable cost recovery to suppliers provides little incentive for cost minimization and efficiency improvement, and may enable inefficient operators to survive. Subsidy calculations are often based on what is essentially self-reporting. Oil 32 companies present the government with total costs incurred, which are almost always higher than industry benchmark costs for efficient operation. • Dual pricing of the same fuel or pricing kerosene far below diesel in the name of protecting the poor is universally accompanied by varying degrees of commercial malpractice. In the extreme, black markets flourish, criminal elements enter the market, the governance of the petroleum sector declines steadily, responsible firms are deterred from entering the market, and infrastructure deteriorates for lack of investment. The foregoing argues for not interfering with pricing in the downstream petroleum sector except through competition policy, and addressing concerns about the adverse effects of high oil prices on the poor and the economy through other means. Within that framework, the government can help lower prices for consumers by taking steps to ensure the development of an efficient downstream petroleum sector with fair competition, where efficiency gains are passed on to consumers in the form of low prices. Evidence from global experience is clear—nothing increases efficiency more than subjecting all firms to relentless competition in a level playing field with sound regulations that are effectively enforced. Virtually all governments recognize that universal price subsidies are generally regressive and inefficient. But various political forces make it difficult to alter these subsidies, for which a delivery mechanism is readily available and requires little administrative capability. Equally important, governments providing large subsidies are often failing to deliver essential social services effectively, and subsidies are given to stay in power and to make up for inconsistent and poor service provision (Victor 2009). For these reasons, it is difficult to divorce price reforms that will have economy-wide consequences from the perceived legitimacy and credibility of the government and its ability to deliver in important areas. Whatever the circumstances, one of the first steps in reforming prices is making fuel pricing policy transparent. Where there is a measure of price control, however limited, the government should establish, through regulations or laws, which agency is in charge of determining prices and the principles governing price control. Costa Rica’s price-setting mechanism formally includes citizen participation, whereby objections can be lodged and considered by the regulatory authority. The criteria for price adjustments, historical and current price calculations, and associated costs―for example, benchmark FOB prices in the relevant markets, exchange rates, various taxes and charges―should be available on the government Web site and through other forms of the media. It is important to disclose price controls at different points along the supply chain and the magnitude of under- and over-recoveries. Brazil, Ghana, and Thailand regularly report price structures but the subsidies at the refinery gate are not explicitly shown, giving a false impression to consumers. Where there is a price stabilization fund, flows in and out of the fund and the fund balance should be regularly reported; such reporting is rare. Equally important, information should be easily accessible, easy to follow, and timely. The pricing information should be consolidated in one place so that consumers are not forced to hunt for information that is scattered on different Web sites, some buried in hundreds of pages of government gazettes. It should not be difficult to post information as soon as new prices are set. If prices are frozen, it is important to keep on reporting world oil prices in local currency units on a regular basis and the cumulative subsidies. For the purpose of helping the poor cope with high oil prices, the most efficient and least distorting approach is arguably to transfer cash as part of an integrated, comprehensive poverty alleviation program, while deregulating the downstream petroleum sector once sufficient 33 competition is demonstrated. The poor do not purchase much gasoline or diesel, because they do not own automotive vehicles for the most part. If subsidies are removed, the poor would be affected just as much, if not more, by indirect effects of subsidy removal through high prices of food and other essential goods and services they consume. Government interventions to keep prices low for each good and service through sectoral subsidies are generally sub-optimal. The transport sector merits special attention, not only because it is affected significantly by oil prices, but also because public transport fare adjustments tend to be regulated and widely publicized. For mitigating the effects of higher public transport fares, one review of various measures adopted to make passenger transport more affordable to the poor concluded that supply-side subsidies given to operators are neutral or regressive. Demand-side subsidies (discounted fares, vouchers) perform better, but not markedly so, because public transport is not an inferior good and the share of household expenditure on public transport tends to have an inverted U shape with respect to income in many countries. Means-tested cash assistance, as in Chile, would be more efficient (Estupiñán 2007). Transport fares are increased for a number of reasons—higher fuel prices, higher labor costs, higher costs of parts and maintenance, high costs of vehicle stock addition or renewal, the need to recover losses from the inability to raise fares earlier, or even to reduce subsidies in the transport sector—but tend to be raised when fuel prices are increased. In countries where governments control fuel prices and adjust them infrequently, fare and fuel price increases often coincide. The public is then inclined to believe that all of transport fare increases and subsequent increases in the prices of other essential goods are due entirely to fuel price increases, giving fuel price reform an excessively negative image. While fuel costs make up only a fraction of the total operating costs and even a smaller fraction when capital costs are taken into account, fare increases in percentage terms can be even higher than the percentage increases in fuel prices. For example, when the price of diesel was raised by 11 percent in September 2011 in Bangladesh, one trucking company raised the fare by 22 percent (Financial Express 2011) and vegetable sellers claimed that transport costs had gone up by one-third or more (New Nation 2011). This points to the critical importance of both having a good communication strategy so that the public does not immediately equate transport cost and fuel price increases, and working closely with the transport sector to manage tariff adjustments. For protecting households, the long-term goal should be to replace fuel price subsidies with effective social service delivery. This takes time, especially because large price subsidies tend to be given in countries with a poor track record of effective service provision, signaling weak institutional capacity, poor governance, or both. To gain public acceptance, mitigation measures with immediate and visible results would be helpful. In countries with widespread commercial malpractice, merely reducing such malpractice could go a long way—reducing or eliminating fuel shortages, which would lower prices; monitoring and enforcing regulations against short-selling, which would lower effective prices for consumers; and monitoring and enforcing regulations against sales of sub-standard fuels, which could save consumers money by eliminating unnecessary damage to vehicles and equipment. Addressing the impact of higher oil prices on businesses and industries is more complex. To the extent that all countries face similar oil prices on the world market, oil price increases should not reduce the competitiveness of a firm unless it is competing with firms in countries that have not curbed price increases using subsidies, tax reduction, or both. For firms that cannot compete without cheap fuels, the question for the government may be how to close down such 34 firms in an orderly fashion and retrain and redeploy their employees. Governments interfere with petroleum product prices in part because they are concerned about inflation. But, as this study shows, it is not clear that the benefits of low fuel prices exceed the many distortions and unintended consequences caused by such a pricing policy over the medium to long run. Ultimately, the issue for all countries since 2004 is how to adjust to a world with much higher oil prices. Oil prices are unlikely to return to the levels last seen in the early 2000s and stay there for a prolonged period of time. The coping mechanism needs to be multi-faceted, including efficient social service provision, especially for the poor, instead of reliance on fuel price subsidies; establishment of a competitive downstream petroleum sector with healthy competition and adequate infrastructure, instead of a sector relying on a cost-plus formula for cost recovery; increasing fuel efficiency driven by price signals and other incentives; and development of a diverse portfolio of energy sources based on sound economics to reduce price risks. 35 Appendix 1: Pricing Policy Information by Country Table A1.1 provides detailed information on the downstream petroleum sector in each country, focusing especially on pricing policies. The table indicates whether a given country is a net oil exporter (√ appears if it is under E in the second column) and whether it has at least one domestic refinery (R in the third column). Where refineries are described as being small, they are of uneconomic scale. In discussing refineries, topping refineries, which cannot make gasoline, are excluded. The table also describes the country’s pricing policy and strategy, supply conditions, and factors affecting fuel demand, such as power outages driving demand for diesel for emergency electricity generation, and supply conditions, such as unscheduled refinery shut- downs. The subsidy figures are based on the country staff reports by the International Monetary Fund (IMF) or government sources—including annual budgets, central banks, and governments’ own news reports. Government and central bank reports are likely to be accurate, but IMF staff reports sometimes report energy subsidies (that is, fuel and electricity) as fuel subsidies, as in Table III.1 in IMF (2012l). Because of the uncertainty regarding the coverage of what is reported as “fuel subsidies� in IMF staff reports, the source of the subsidy data (namely IMF or government) is indicated. Graphs of domestic and benchmark FOB diesel prices for the last five to six years in local currency are shown for 11 countries to illustrate the workings of different pricing policies and what consumers have faced. FOB benchmark prices in the relevant regional refining centers are also plotted to show how world diesel prices were moving during the same period. The sources of the data are described in Table A2.1 in Kojima (2012). Of all the petroleum products, gasoline and diesel are widely consumed in every country, while the consumption of other petroleum products depends on country circumstances. Of the two most widely consumed fuels, governments are more likely to intervene in diesel fuel pricing, regarded in many countries as a “social� fuel because of the economy-wide effects of its price levels. For this reason, diesel fuel is selected for plotting to illustrate pricing policies of different governments. In addition, the recent price trajectory of LPG in Thailand is also shown, as it provides useful information. Table A1.1: Oil export status in 2010, current refining status, pricing and tax policy and strategy, and fuel supply conditions Country E R Pricing policy and strategy Fuel supply conditions Angola √ √ Pricing policy: Fuel prices are uniform in the country, controlled by Supply: There is one small, old refinery. government, heavily subsidized, and last changed in Sep 2010, when The plan to build a new large refinery has the prices of gasoline, but no other fuel, were raised. encountered a series of problems attracting Subsidies: IMF said in Aug 2012 that fuel subsidies in 2011 investment. amounted to 7.8% of GDP (US$7.9 billion), equivalent to more than Smuggling: Fuels are smuggled out of the 90% of public investment spending. country. Argentina √ √ Pricing policy: The sector was deregulated in 1989, but in recent Supply: Four large refineries provide the years government has kept prices of all forms of energy low through bulk of domestic production. Venezuela domestic gas and electricity tariff freezes, indirect price controls on and Argentina signed a fuel purchase petroleum products, and heavy export taxes on oil. Government has agreement in May 2009. By end-2011, the been controlling prices in many sectors of the economy through debt owed by Argentina had grown to “voluntary� price agreements since 2005 to curb inflation, including US$1.3 billion. The 1974 Law of Supply those with petroleum product retailers. In Jul 2012, an executive allows the imposition of fines or decree 1277/2012 was issued, abrogating sections of 1989 decrees imprisonment of company executives for that provided for the freedom to set prices and to import and export shortages of goods, including fuels. fuel. The decree established a new commission that has authority Argentina began using a tax-free import over pricing. Prices of LPG in 10-, 12-, and 15-kg cylinders sold to system in 2005 to help make up for a low-income households have been frozen for years. A federal fund domestic diesel shortfall during the for LPG provides stable LPG prices and helps expand natural gas agricultural seasons (middle and end of 36 Country E R Pricing policy and strategy Fuel supply conditions pipeline networks. The diesel price for public transport used to be year), on the condition that the participating subsidized, costing government 6.5 billion pesos (US$1.5 billion) in companies sell diesel at government- 2011. Government brought the diesel price for public transport to be controlled prices. in line with the regular retail prices in early 2012. Upstream sector: The exceptionally low Response to fuel tourism: Filling stations near the Brazilian border export price of oil until Jan 2013 has led to list two different prices for gasoline, one for cars with Argentinian oil production falling from 0.72 million bpd license plates and another one for foreign plates, to restrict Brazilian in 2006 to 0.61 million bpd in 2011, while drivers from buying cheaper fuel in Argentina. consumption grew from 0.47 million to Pressure on oil companies to lower prices: In Aug 2010, 0.61 million bpd. Government increased the government ordered oil companies to roll back price increases, export tax on natural gas from 45% to while simultaneously threatening to apply the 1974 Law of Supply. 100% in 2008. Natural gas production fell Prices remained frozen between mid-Aug and mid-Dec. In February from 46 billion cubic meters (bcm) in 2006 2011, government issued a resolution after Shell Argentina raised to 39 bcm in 2011, while consumption grew gasoline and diesel prices by up to 3.6%, ordering Shell to reverse from 42 to 47 bcm. the price increases, imposing a price freeze, and requiring oil Shortages: Diesel shortages are frequent. companies to maintain supplies to the local market at prior-year Refining capacity is inadequate, because levels. The resolution was repealed in the following month. In Jan price controls and export restrictions 2012, government accused oil companies of over-charging cargo discourage investment in new capacity transporters, launched an investigation, and later in the month addition. Gasoline shortages have also been ordered the companies to lower diesel prices for both cargo and increasing, especially of non-premium passenger transport companies. gasoline. Power plants are forced to switch Consequences of subsidies: Some 3,500 retail outlets closed from natural gas to diesel during the peak between 2005 and Mar 2010 because of poor profitability. winter season for lack of gas. The Total Use of export tax to lower domestic prices: Until Jan 2013, the Energy program, established in 2007, export tax on crude oil was 100% above US$45/barrel (bbl), making subsidized fuels used as substitutes for the export price US$42/bbl. Government relaxed the export tax in natural gas to address gas shortages, but Jan 2013, raising the oil export price from US$42 to US$70/bbl. increased petroleum product consumption. Information: There is comprehensive coverage on the Web of Besides the foreign-exchange controls put current and historical gasoline, kerosene, and diesel prices by in place in 2011, since Feb 2012 location and company. Government uses price surveys to boost government has required prior approval for transparency and indirectly press companies to reduce prices. all import transactions, a move that may Monthly price surveys are carried out at filling stations and the worsen fuel shortages. Fuel shortages have National Statistics and Census Institute (Instituto Nacional de prompted government to invoke the Supply Estadistica y Censos, or INDEC) posts price and volume Law of 1974. Amidst a gasoline shortage in information for each filling station every month on its Web site, Mar 2010, government accused Shell and going back to Dec 2004. Petrobras of intentionally lowering refining production to create a supply shortage. For the first time in 30 years, Argentina imported gasoline. Government in Feb 2012 told oil companies to increase production. Because of tightening government control, the trade balance of the energy sector turned negative for the first time in 2011. To stem this trend, government has steadily tightened trade restrictions. Bangla- √ Pricing policy: Fuel prices are controlled by government and not Supply: One small refinery meets less than desh adjusted regularly. Prices were raised several times in 2011, but 30% of the country’s demand. A plan to were not adjusted between Dec 30, 2011 and Jan 4, 2013. In Mar triple the refinery capacity has been under 2012, the price of diesel needed to rise by another 45% to break consideration. Various projects are even. IMF reported in Mar 2012 that government was expected to underway to increase storage capacity for adopt an automatic adjustment formula by December 2012, which petroleum petroleum products and install a would ensure full pass-through of changes in international prices. single-point mooring that will reduce the Government raised fuel prices by up to 11% in Jan 2013. Even after time for unloading crude oil and diesel the Jan 2013 price increases, diesel and kerosene were reported to be from 15 to 2 days. suffering from under-recoveries of about Tk 12 (US$0.15)/liter. The Shortages: Shortages of natural gas and price of LPG in 12.5-kg cylinders sold by Bangladesh Petroleum power, the prices of which have been kept Corporation (BPC) has not changed since Jun 2009. low, are serious and have contributed to 37 Country E R Pricing policy and strategy Fuel supply conditions Consequences of subsidies: BPC has taken out loans from state- increasing demand for petroleum products. owned commercial banks, received budgetary transfers to cover its Smuggling: Smuggling of diesel to India operating losses, and relied on banks to provide much of the foreign and Myanmar has been reported. exchange needed, because delayed budgetary transfers have caused BPC to regularly lack funds to purchase foreign exchange for oil imports. Banks are reluctant to issue letters of credit. An official figure reportedly shows that BPC’s bank liabilities stood at Tk 192 billion ($2.3 billion) in 2012 and Tk 172 billion ($2.3 billion) in 2011. BPC in 2011 negotiated with Malaysia’s national oil company Petronas and the Philippines National Oil Company to extend US$550 million and US$250 million, respectively, on deferred payment for fuel oil for up to one year with minimal interest. Government established a technical committee in January 2012 to monitor closely the finances of BPC to ensure regular budget transfers to cover subsidy-related losses and to enable it to buy foreign exchange from domestic banks to pay for petroleum imports. In 2012, government decided to reduce fuel imports by BPC to save foreign exchange, Bangladesh Power Development Board decided to lower electricity purchases from oil-based power plants to cut costs, 22 of the 29 oil-fired power plants were shut down in early Mar 2012, and Dhaka Electric Supply Company served notice to mills and factories to keep their units shut from 6 P.M. to 6 A.M. Compensation: Government has been providing cash subsidies to farmers for diesel for irrigation. Information: BPC posts current fuel prices on its Web site. Bolivia Pricing policy: Fuel prices are uniform, controlled by government, Supply: Bolivia has two small refineries. √ and frozen for years at a time. Since Jan 2009, vehicles with foreign Smuggling: There is significant smuggling licence plates have been charged international prices, set every of subsidized fuels to neighboring quarter. On the domestic market, the price of oil is US$27/bbl. countries. Concerned about declining oil production, government issued Supreme Decree 1202 in Mar 2012, providing a tax credit of US$30/bbl to foreign companies in addition to US$10 in cash they were receiving. As late as Dec 24, 2010, government was reportedly denying any intention to reform subsidies. However, just two days later, as part of a broader subsidy reform, government increased diesel price by 83% and gasoline by 73%, the largest since 1991 when prices were raised by 35%. Government was also to raise the fee paid to oil producers from US$27 to US$59 a barrel. Protests: The increases in Dec 2010 were completely reversed 5 days later following widespread protests, as was food subsidy reduction. Consequences of subsidies: Fuel subsidies have amounted to about 3% of GDP in recent years. Year 2005 2006 2007 2008 2009 2010 2011 US$ billion 108 140 288 487 462 666 706 % of GDP 1.1 1.2 2.2 2.9 2.7 3.4 2.9 Government newspaper Cambio. Information: Government posts current fuel prices on its Web site. In Feb 2011, government created a new ministry of communications, 8 years after such a ministry had been abolished. Brazil Pricing policy: Prices were deregulated by law in Jan 2002, but in Supply: Petrobras owns 98% of the √ practice the national oil company, Petrobras, has frozen ex-refinery country’s refining capacity. In May 2011, prices for years on end, with mounting losses. The national average government announced that it was producer price of pure gasoline were kept within a narrow band of launching an investigation into Petrobras’ R$1.51−1.55/liter between Sep 2005 and Jan 2013, that of diesel fuel distribution and retail division for within R$1.33−1.37 between Aug 2009 and Jul 2012, and that of alleged abuse of its dominant market LPG sold in 13-kg cylinders has been kept within R$1.03−1.05 per position in Brasilia. Pure gasoline is not 38 Country E R Pricing policy and strategy Fuel supply conditions kg since Nov 2003 (with higher prices earlier). Ex-refinery prices of available on the market; instead hydrous gasoline and diesel were raised twice in 2012, and in Jan and Feb ethanol and a gasoline-anhydrous ethanol 2013. Government adjusts a tax on gasoline and diesel contributing to blend are sold for spark-ignition vehicles. intervention in the economic domain, called CIDE (Contribuição e The amount of ethanol in the gasoline- Intervenção no Domínio Econômico), to further stabilize retail prices. ethanol blend is regulated and varies A negative CIDE tax was levied on LPG until Apr 2002. Monthly between 18% and 25%. The blending average retail prices of diesel (averaged across the country) and FOB percentage is determined largely by benchmark prices relevant to Brazil since 2007 are shown below. The sugarcane production and world sugar plot shows significant price smoothing. prices. Decreasing the percentage of 2.5 ethanol increases demand for gasoline, requiring gasoline imports in recent years and forcing Petrobras to import at world 2.0 prices and sell at a loss on the domestic B$ / liter of diesel market. 1.5 1.0 0.5 U.S. Gulf Coast spot price Retail in Brazil 0.0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Consequences of pricing policy: Petrobras’ refining, transportation, and marketing division lost US$8.5 billion in 2011 and US$17.5 billion in 2012. The recent decline in the company’s financial performance, including its first quarterly loss in 13 years posted in August 2012, has been blamed in large part on low domestic fuel prices. Cuts in CIDE in recent years have cost hundreds of millions of dollars. Social protection: In Apr 2002, the LPG subsidy was eliminated and replaced with assistance to enable the poor to use LPG through LPG vouchers in Bolsa Familia, government’s social welfare program. Information: Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (ANP, National Agency of Petroleum, Natural Gas and Biofuels) posts detailed historical and current information on prices on its Web site. Information posted includes weekly surveys of retail prices of gasoline, diesel, and LPG and marketing margins. In May 2004, the survey coverage was expanded to a total of 555 locations. ANP also issues annual reports on global and domestic prices. Cambodia Pricing policy: Fuel prices are deregulated, but government has Supply: There is no oil production in engaged oil companies, urging them to lower prices from time to Cambodia, but government has been time. pursuing a domestic refinery project since the commercial oil discovery in 2005. Cameroon √ √ Pricing policy: Government operates a stabilization fund, Caisse de Supply: There is one small refinery, which Stabilisation des Prix des Hydrocarbures (CSPH, Fund for is not designed to process domestic crude Hydrocarbon Price Stabilization). Automatic fuel price adjustments and uses imported crude oil. were suspended following protests in Feb 2008 (see below) and fuel Shortages: Shortages of LPG have been prices were lowered. Fuel prices were frozen until Dec 2008 when frequently reported. they were lowered, and have not been adjusted since. Government’s policy since 2008 is to compensate the national oil company’s refinery for the difference between the prices set by the formula adopted in 2007 and the administratively fixed prices. Government announced fuel price increases effective Jan 2012, but backed down after threats of a strike. A finance ministry official told Reuters that the events of 2008 as well as the protests in Nigeria in January 2012 39 Country E R Pricing policy and strategy Fuel supply conditions against gasoline price liberalization ruled out subsidy cuts. Protests: In Feb 2008, a strike by transport workers against high fuel prices and poor working conditions was followed by a series of violent demonstrations against broader political issues as well as the high cost of living. These protests left at least 30 people dead (official figure), while some have cited more than 100. Consequences of subsidies: IMF reported that government had spent FCFA 146 billion (US$0.3 billion) in 2010 (1.3% of GDP) and FCFA 309 billion (US$0.65 billion) in 2011 (2.5% of GDP) on fuel subsidies, and subsidies in 2012 were expected to reach FCFA 400 billion (US$0.8 billion). Cumulative obligations and arrears to the refinery at the end of 2011 amounted to FCFA 445 billion (US$0.9 billion), or 3.7% of GDP. In Mar 2012, as part of the measure to clear the arrears, government agreed to cancel FCFA 87 billion (US$0.2 billion) worth of taxes due from the refinery in the second half of 2011. Chile √ Pricing policy: Various stabilization mechanisms have been in Supply: Chile has two large sophisticated effect since 1991 following the Gulf War, when government refineries. established FEPP (Fondo de Estabilización de Precios del Petróleo, Impact of power shortages: Low rainfalls Stabilization Fund for Petroleum Prices). In September 2005, reducing hydropower and much lower gas government established a new temporary price stabilization fund, imports from Argentina increased demand FEPCO (Fondo de Estabililización de Precios de Combustibles for diesel in 2007−08. ENAP (Empresa Derivados de Petróleo, Petroleum Product Price Stabilization Fund), Nacional del Petróleo, National Oil intending to retire it by June 2006. After FEPCO became effective, Company), Chile’s sole refiner, lost almost FEPP was restricted to LPG and fuel oil. Subsequent world price US$1 billion in 2008 after being caught movements prompted government to keep the fund operating until with large inventories of crude oil and 2010. A law published in February 2011 replaced FEPCO with diesel when a surge in hydropower SIPCO (Sistema de Protección al Contribuyente ante las Variaciones production cut diesel demand. en los Precios Internacionales de los Combustibles, System of Protection against Variations in International Fuel Prices). SIPCO covers small and medium enterprises and dampens the impact of price volatility of four automotive fuels—gasoline, diesel, automotive LPG, and CNG—through a variable component that is subtracted from or added to the base component of the specific fuel tax, determined by the price difference between import parity and the upper or lower band of reference prices. Adjustments are made if world oil prices differ from the reference price by more than a certain percentage point, which was initially 12.5% but changed to 10% in Sep 2012, when the duration of the tax adjustments was also changed to 4–52 weeks. The reference price is established by Ministry of Economy, which considers both current and future prices (future prices are given a weight ranging from 0 to 50%) and adjusts the price band every four weeks. SIPCP does not cover large diesel consumers such as power plants and mining companies. Monthly average retail prices of diesel in the Metropolitan Region and FOB benchmark prices relevant to Chile since 2007 are shown below. Except in 2008, the degree of price smoothing has been small, if any. 40 Country E R Pricing policy and strategy Fuel supply conditions 700 600 Pesos / liter of diesel 500 400 300 200 U.S. Gulf Coast spot price 100 Retail in Metropolitan Region 0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Protests: Taxis and mini-buses went on strike in Oct 2011, protesting fuel price hikes and asking to be included in transport policy, including subsidies. Hedging: Hedging is explicitly regulated by law. Information: The National Energy Commission (Comisión Nacional de Energía, CNE) posts monthly average prices of all fuels by region, dating back to Jan 1994. A resolution issued in Jan 2012 require that prices of gasoline, diesel, kerosene, CNG, and automotive LPG at each filling station be published on CNE’s Web site, and they are ranked in order of increasing or decreasing price depending on the viewer’s preference. Resolution No. 60 issued in Jan 2012 requires that each filling station enter price information in a national online price database, which is published on CNE’s Web site, and also made available on iPhone, BlackBerry, and Android. The Web site displays minimum and maximum prices, the address of each filling station, prices, and the date and time of the last price change. Retailers are required to enter new prices no earlier than 15 minutes before price changes are implemented. China Pricing policy: A new mechanism introduced in Jan 2009 bases fuel Supply: The 2012 worldwide refining √ prices on a 22-day moving average of a basket of crude oil prices. survey of the Oil and Gas Journal reports When the average is below US$80/bbl, prices move relatively freely 54 refineries with combined capacity of 7 and refiners are expected to earn “normal� margins. Between US$80 million bpd at end-2012. and US$130/bbl, domestic prices are responsive but refiners no Fuel shortages: There have been frequent longer make a profit. Above US$130, tax measures are used to keep fuel shortages as refiners cut back on domestic prices low. Although price adjustments are triggered if the production to minimize financial losses. 22-day moving average changes by more than 4% from the previous Severe diesel shortages forced thousands of price-setting level, concerns about inflation often delay the filling stations to shut down and others to implementation of price increases. Retail prices were changed only ration in late 2010 as firms turned to diesel three times in 2008, eight times in 2009, four times in 2010, three power generation when power was rationed times in 2011, and eight times (half of which were price reductions) to meet the national energy intensity target in 2012. In Jul 2011, government cut or removed import duties: for 2006−10. Power shortages in May 2011, eliminated them for diesel and jet fuel (both previously 6%), and caused in part by the failure of power tariffs reduced them to 1% for gasoline (5%) and fuel oil (3%). In Aug to keep up with rising coal prices as well as 2011, government moved to monthly adjustments of jet fuel prices. hydropower shortages, led to surging The price increases in 2011 were fractions of global price increases. demand for diesel, which led government to The scale of these losses are consistent with government’s own impose a temporary ban on diesel exports. statement that, according to the 4% rule, the prices should have been Price cuts in Oct 2011, the first in 16 raised nearly triple the actual increases. Government canceled value- months, led to serious diesel fuel shortages. added tax (VAT) on fuel imports in 2008, and announced a 5% sales The Xinhua News Agency has partially tax on oil and gas in Oct 2011. The most recent proposal reported blamed hoarding by refiners and traders for pricing would allow oil companies to set prices as long as world before price increases for fuel shortages. oil prices are between US$40 and US$130 a barrel, while shortening This behavioral response to the price the averaging period to 10 days. Wholesale prices of diesel set by adjustment mechanism is one of the reasons 41 Country E R Pricing policy and strategy Fuel supply conditions government and FOB benchmark prices relevant to China since government is said to be reconsidering the 2007 are shown below. Moving to more frequent price adjustments current formula. just as world oil prices collapsed at the end of 2008 made moving to Strategic reserves: China has completed formula-based price adjustments easier. and filled 103 million bbl of storage in the 8 first phase of its strategic petroleum reserve (SPR) plan and is working on building 169 7 million bbl of storage by 2013 and 228 million bbl by 2016. China filled its first 6 Yuan / liter of diesel phase of SPR at US$60/bbl. The Ministry 5 of Commerce published the Guidelines on the Development of Oil Circulation 4 Industry in 12th Five-Year Plan (2011−2015) in Dec 2011, calling for 3 commercial stocks of products and 2 allowing local governments to look into Singapore spot price setting up local diesel reserves. 1 Wholesale in China 0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Consequences of subsidies: Refiners have suffered significant losses. Two largest refiners, PetroChina and Sinopec, suffered refining losses of 60.09 billion yuan (US$9.30 billion) and 35.78 billion (US$5.54 billion), respectively, in 2011. In 2012, their combined losses from refining due to government controls of gasoline and diesel prices amounted to 55.4 billion yuan (US$8.8 billion). In 2007−08, the losses suffered by PetroChina and Sinopec were so large that government compensated them. Temporary ban on exports to lower domestic prices: Government imposed a temporary ban on diesel exports in 2011. Hedging: The extent of losses from hedging has attracted regulatory scrutiny. To lower costs, companies chose options that provided some upside if oil prices remained high but did not protect against a price collapse. China Eastern’s hedging loss of 6.2 billion yuan (US$906 million) by Dec 2008 prompted an investigation by the National Audit Office. After large losses suffered by 68 state-owned companies in 2008, including Air China’s 6.8 billion yuan (US$1 billion), State-Owned Assets Supervision and Administration Commission announced in Sep 2009 that government was investigating the hedging contracts signed. In Oct 2009, government imposed limits on hedging: 50% of fuel for those reporting significant losses previously or those deemed inexperienced, and 90% otherwise. In 2011, airlines received authorization to resume hedging. Compensation: In Apr 2009, government announced that it would subsidize public transportation, fisheries, and state-owned forestry firms when the state-set ex-refinery prices for gasoline and diesel exceed 4,400 yuan (US$700, or about US$0.94/liter) and 3,870 yuan (US$615, or US$0.73/liter) a tonne, respectively. Central government pays for all fuel costs above the threshold prices for individual fishermen or fishing enterprises operating inshore or inland, as well as state-owned forestry and urban public transportation companies, and half of the surplus costs for rural road and water transportation companies and ocean fishing firms when ex-refinery price for gasoline is between 4,400 and 5,480 yuan (US$870) a tonne and that for diesel between 3,870 yuan and 5,070 yuan (US$805). Above these prices, central government pays all 42 Country E R Pricing policy and strategy Fuel supply conditions additional costs. In March 2012, the National Development and Reform Commission, which sets fuel prices, said a monthly subsidy of about 300 yuan (US$48) would be given to taxi drivers across the country to compensate for the fuel price increase, and finance ministry said it had earmarked 67.4 billion yuan (US$11 billion) for oil subsidies for fisheries, forestry, public transport, and taxis, as well as 24.3 billion yuan (US$3.9 billion) for agriculture to ensure that farmers’ income is not adversely affected by oil price increases and possible price increases for agricultural materials later in the year. Colombia Pricing policy: Fuel prices are controlled and price ceilings are set Supply: Colombia has one large refinery √ √ by Ministry of Mines and Energy, subject to the ultimate authority and another reasonably size one. of Superintendency of Industry and Commerce (Superintendencia de In-smuggling: There is significant Industria y Comercio, SIC), which exercises control over price smuggling of heavily subsidized fuel from increases. Price setting is at the discretion of government. A fuel Venezuela. To curb smuggling, Venezuela stabilization fund for gasoline and diesel was created at end-2008, has been providing Colombia with the purpose of which was to eliminate fuel price subsidies. An initial subsidized petroleum products. In 2009, deposit of about US$170 million was transferred to the fund at the Colombia was provided with 30,000 bpd, time. Budgetary transfers for fuel subsidies in 2009 amounted to the same amount as smuggled fuel, at half 4,906 billion pesos (US$2.3 billion). There are no rules governing the world price. This arrangement was withdrawals from the fund, as in Chile. By end-2011, the fund’s suspended between Aug 2009 and Dec deficit had grown to 2.2 trillion pesos (US$1.2 billion). In Mar 2013, 2010 due to political tension between the government agreed not to raise diesel prices after a transport strike. two countries. Protests: In Mar 2013, thousands of truckers went on an indefinite strike to protest against rising fuel prices. The strike ended after three days after government agreed to reverse a price increase and not to increase the diesel price for three months. Hedging: Although different from hedging petroleum product prices, Ecopetrol, the national oil company, hedges crude oil exports. Hedging cost Ecopetrol US$450 million in 2011, and incurred costs in six out of the past seven years, prompting a congressional hearing in 2012. Information: Ministry of Mines and Energy posts detailed price information by location for gasoline and diesel every month, dating back to Jul 2003. Costa Rica Pricing policy: The regulatory authority adjusts fuel prices, uniform Supply: Costa Rica has one small refinery. √ throughout the country, every month based on the average international prices during the previous 15 days and the exchange rate. LPG prices are independent of cylinder size, reflecting cross- subsidization. The price-setting mechanism formally includes citizen participation whereby objections can be lodged and considered by the regulatory authority. In Jun 2008, government eliminated taxes on diesel and switched the levy to gasoline to protect the vulnerable from surging oil prices. Costa Rica is a member of the Friends of Fossil Fuel Subsidy Reform. Information: The national refining company posts detailed information on price adjustments on its Web site going back to 1994. Compensation: An audit reported in 2012 found that fishing boats had received a total of US$112 million in subsidized fuel (on which taxes had been levied) in the last seven years. Côte Pricing policy: Fuel prices are subject to ceilings, uniform Supply: Côte d’Ivoire has one refinery of √ √ reasonable size and complexity. d’Ivoire throughout the country for gasoline, diesel, and kerosene. LPG prices were frozen between 2008 and Jan 2013, and other fuel prices Strategic reserves: Côte d’Ivoire set up have been frozen since April 2010 except the price of gasoline, Société de Gestion des Stocks Pétroliers de which was raised in Jan 2013. LPG prices set by government are Côte d’Ivoire (GESTOCI, Oil Stock meant to be maximum prices, but often they represent minimum Management Company of Côte d’Ivoire) in 43 Country E R Pricing policy and strategy Fuel supply conditions prices on the market. The Jan 2013 price increases eliminated the 1983 under the technical supervision of price subsidy for LPG sold in 28-kg cylinders, significantly Ministry of Mines and Energy and the widening the differences in unit prices of LPG sold in 6-, 12.5-, and financial supervision of Ministry of 28-kg cylinders; the price per kg of LPG sold in 6-kg cylinders is Economy and Finance to manage depots at now half of that in 28-kg cylinders. three locations and security stocks, required Protests: In Mar 2008, sharp increases in food and fuel prices to be equivalent to two months of average sparked riots, injuring more than a dozen people. sales. There is a legal requirement to Information: Ministry of Commerce posts minimum and maximum maintain operational stocks equivalent to prices of essential food and other items, including, gasoline, half a month of sales and strategic stocks kerosene, diesel, and LPG, by location several times a month. equivalent to two months of sales. GESTOCI and other companies have been engaged in increasing storage capacity (especially for LPG), building a petroleum product pipeline from Abidjan to Bouaké, and rehabilitating the depot in Bouaké. Dominican √ Pricing policy: Prices are uniform. Since Nov 2000, official prices Supply: PetroCaribe member. In Sep 2011, Republic have been published weekly according to an import-parity pricing Venezuela announced that it would increase formula. Petroleum products are taxed with a specific and an ad- the amount of oil provided to the valorem tax which vary by fuel type. By law, the specific tax should Dominican Republic under the accord from be indexed to inflation with quarterly adjustments, but government 30,000 to 50,000 bpd. There is a 34,000 starting in 2007 has chosen not to implement the indexation. By bpd refinery. regulation, maximum prices for LPG must be the same for residential, commercial, and industrial consumers. Social protection: In Sep 2008, the price subsidy for LPG was eliminated and replaced with a social protection scheme whereby 730,000 bonogas cards were issued to poor families, entitling them to a monthly reduction of RD$228 (US$6.30 at the time) for LPG purchase. Information: Government posts current and historical fuel prices every week on its Web site, showing data going back to Jan 2008. In addition, selective data going back to 2001 are also posted. Egypt, Pricing policy: Fuel prices are uniform in the country, controlled by Supply: Egypt has 4 refineries that are √ √ Arab Rep. government, and frozen for years at a time. The official price of 100,000 bpd or larger, and several smaller LPG has not changed since 1991, and is among the lowest in the ones. Diesel imports account for about one- world. In Nov 2012, government eliminated the subsidy for 95 RON fourth of consumption. Egypt imports 2 gasoline and raised the price from LE 2.75 (US$0.45) to LE 5.85 million tonnes of LPG a year and sells it at (US$0.96). In Sep 2012, the new petroleum minister gave the details less than one-tenth of the import cost. of the pricing structure to reduce the fuel subsidy burden, marking Government has LPG reserves. the first time the details were made public, although most of the Smuggling: In Feb 2013, Minister of proposals had been under discussion for several years. About 12 Petroleum and Mineral Resources said that million households would be eligible to receive two 12.5-kg LPG curbing fuel smuggling would save roughly cylinders a month at LE 5 (US$0.82). Households connected to the LE 10 billion (US$1.5 billion). natural gas grid would not be eligible. LPG outside the quota would Shortages: Fuel shortages, historically a be available for LE 30 (US$5) a cylinder, still half the market price problem, worsened in 2012, in part because at the time of the announcement. A coupon system would be importers faced long delays in securing introduced for diesel, enabling certain users, including farmers and letters of credit. Smuggling of subsidized taxi-drivers, to purchase specified quantities at LE 1.10 (US$0.18)/ fuels out of the country and diversion of liter, while the remainder of consumers would be charged the full fuels to black markets also contribute to price of LE 4.85 (US$0.80)/liter. In Dec 2012, modified details fuel shortages. LPG shortages in winter are about LPG subsidies were reported, raising the coupon price of LPG the norm, but in 2012, shortages did not in 12.5-kg cylinders to LE 8 (US$0.11/kg). The price of fuel oil ease in Mar. LPG shortages in Nov– Dec would be raised from LE 1,000 (US$164)/tonne to LE 2,300 2011 led to two deaths and increased prices (US$378)/ tonne except for food and a few other industries. In Jan on the black market by as much as 20-fold. 2013, Ministry of Trade and Industry announced that it would raise The dealer commission of LE 0.1 the price of fuel oil for the cement and ceramics industries from LE (US$0.02) per cylinder is too small and the 1,000/tonne to LE 1,500 (US$246)/tonne. In Feb 2013, Minister of reason cited by the petroleum minister in Petroleum and Mineral Resources said that rationing of subsidized Feb 2012 for the flourishing black market fuel would be implemented using a system of smart cards between 44 Country E R Pricing policy and strategy Fuel supply conditions Apr and Jul 2013. In Mar 2013, government announced that it would and the serious LPG shortage across the begin experimental implementation of smart cards for the country. Diesel shortages harm agriculture distribution of subsidized fuel for government vehicles starting from and fisheries, and occur every year during May 1 and for the public from July 1. Continuing diesel shortages the harvest season (May). Bakeries need for buses and trucks in Mar 2013 led the oil minister to dismiss top diesel, but bread prices are controlled and officials at two government-owned oil companies. subsidized, making it difficult to pay higher Protests: Protests, sit-ins, and strikes about LPG shortages have prices for diesel. In Jan 2012, panicked forced Egypt’s police and army to provide armed guards for gas motorists—forming long lines when rumors deliveries. about a price increase spread—were Consequences of subsidies: Subsidies for liquid fuels and natural blamed for serious fuel shortages that led to gas in fiscal 2007/08 (July–June) were estimated to amount to 7.1% one death and several injuries. Six more of GDP, diesel accounting for half. The budget for fiscal 2012/13 were killed in fights over LPG cylinders in cut fuel subsidy allocation to LE 70 billion (US$11.6 billion) from Jul 2012. LE 95.5 billion (US$16 billion) in the 2011/12 budget. Fuels are diverted to black markets or smuggled out of the country. El Pricing policy: Ministry of Economy announces maximum LPG Supply: There is a 22,000 bpd refinery. √ Salvador prices for four points in the supply chain every month. Legislation Shortages: When shortages occurred due to passed in May 2011 waived gasoline’s contribution to a stabilization heavy rain in Oct 2011, the Directorate of fund (Fondo de Estabilización y Fomento Económico) in the second Hydrocarbons and Mines of the Ministry of half of 2011 to lower prices. Economy was in constant communication Social protection: El Salvador provides cash transfer of with all oil companies to ensure 15 days of US$9.10 a month to the poor and institutions catering to the poor stockholding. for LPG. Beginning in Aug 2011, the recipients could choose to have subsidies deposited through their electricity bills. Compensation: Public transport is subsidized in proportion to fuel prices, although fiscal problems have made it difficult to continue the subsidies and the administration of President Funes in 2012 was considering a proposal to cut subsidies by 40%. Information: Ministry of Economy posts lowest prices in three parts of the country every week as saving tips for consumers. Ethiopia Pricing policy: Ministry of Trade examines fuel prices every month Shortages: Prolonged LPG shortages in and adjusts them, although not regularly. Government stopped the 2011 prompted households to turn to policy of subsidizing petroleum fuels in 2008 and set domestic electricity for cooking. A shortage of prices higher than import costs beginning in Oct 2008 to repay the ethanol caused a gasoline shortage in early debt accumulated in the Oil Stabilization Fund. The price of 2012. kerosene, which is untaxed and also cross-subsidized to some extent, Commercial malpractice: Adulteration of is lower than other fuel prices. Prices are frozen for months at a gasoline and diesel with kerosene is a time: kerosene prices did not change between Mar and Oct 2011, problem. and between Oct 2011 and Jul 2012 (the last month for which price data are available on the Web site of Central Statistical Agency); gasoline and diesel prices did not change between Jan and July 2012. The content of ethanol blended in gasoline was increased from 5% to 10% in mid-Mar 2012 to lower gasoline prices. Information: The historical data from monthly consumer price surveys, including petroleum products, used to be posted on the Web site of Central Statistical Agency by location. The last month for which the price information was available is Jul 2012. Gabon Pricing policy: Fuel prices are controlled by government, Supply: There is a 24,000 bpd refinery. √ √ subsidized, and adjusted infrequently. The last price increase took Shortages: Fuel shortages have led to place in Jan 2009. The price of kerosene has been frozen longer. prices rising above the official levels. Ghana Pricing policy: Ghana liberalized fuel prices in Feb 2005 and began Supply: Ghana has one 45,000 bpd √ setting price ceilings in line with world prices. A 2005 law refinery. It has been experiencing financial establishing the National Petroleum Authority (NPA) also and operational problems for years, forcing established the Unified Petroleum Price Fund (UPPF) to equalize the refinery to shut down for technical and transport costs. A UPPF levy is imposed on each fuel, about financial reasons, including the inability to US$0.03/liter in Feb 2013. The ex-refinery differential, which secure letters of credit to buy crude. Until 45 Country E R Pricing policy and strategy Fuel supply conditions operates like a price stabilization fund, was introduced in the last 2011, the refinery was the monopoly quarter of 2006 to pay fuel marketers for under-recovery of costs for importer of petroleum products. selling kerosene, LPG, and premix. Government began reviewing Strategic reserves: A state-owned prices twice a month in Oct 2007, but suspended price adjustments company, Bulk Oil Storage and between May and Nov 2008. The frequency of price adjustments fell Transportation Company (BOST), is sharply beginning in 2009. There was a 30% price increase in Jun mandated to develop a network of storage 2009. There were no price adjustments in 2010, two price increases tanks and keep strategic reserves. Gasoline, in 2011, and one downward price adjustment in 2012, with several of kerosene, and diesel are charged a BOST these adjustments tending to be large. In Feb 2013, prices were raised margin. by between 15% (kerosene, the price of which had been frozen since Storage capacity: The available storage end-Oct 2009) and 50% (LPG). The price of pre-mix was not capacity can cover more than 4 months of adjusted, widening the price difference between gasoline and pre-mix gasoline, diesel, and kerosene consumption. to a factor of nearly 4. A cross-subsidy levy is charged on each fuel, In contrast, LPG storage capacity is limited, with gasoline contributing to the cross-subsidy and all other fuels forcing LPG imports in small parcels and benefiting from it. The price ceilings for diesel and monthly average pushing up costs. benchmark FOB prices relevant to Ghana since 2007 are shown Shortages: There are frequent shortages of below. The plot shows that the frequency of price adjustments has premix because it is diverted on a large fallen sharply in recent years. scale and mixed with gasoline. 2.0 Smuggling and diversion: Fuel is 1.8 smuggled out to Togo and other countries. 1.6 1.4 Cedis / liter of diesel 1.2 1.0 0.8 0.6 0.4 Northwest Europe spot price 0.2 Retail in Ghana 0.0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 The bulk of the subsidy is provided not by the cross-subsidy levy but at the point of setting the ex-refinery price. In Nov 2011, the ex- refinery price differential was declared illegal, and the stay of execution was denied in Jan 2012. Premix (gasoline mixed with lubricant) is used in fishing boats and heavily subsidized, priced at less than one-third of gasoline since Dec 2011. In Feb 2013, NPA called on government to eliminate subsidies by Dec 2013. Protests: A price increase of 30% for gasoline and diesel in Jan 2011 sparked street protests in Accra. Consequences of subsidies: NPA said in Feb 2012 that the fuel subsidy in 2011 was in excess of 450 million cedis (US$276 million). There have been fraudulent claims against UPPF of products being delivered to remote areas when they were actually delivered to major consumption centers in urban areas. LPG subsidies have led to soaring consumption of automotive LPG, causing shortages and prompting commercial LPG vehicle drivers to ask government for subsidy removal so as to ensure reliable supply. Hedging: Ghana’s cabinet in Mar 2010 approved a Commodity Price Risk Management Policy, paving the way for hedging petroleum products and crude oil. Ghana hedged half of its crude oil requirements in 2010−11. In Jun 2011, the finance minister announced that government would hedge 100% of crude output and about half of crude purchase. IMF reported in Feb 2012 that sizable 46 Country E R Pricing policy and strategy Fuel supply conditions hedging gains in the first half of 2011 allowed fuel subsidies to be covered through July. In Jan 2012, government announced that it was hedging crude on a quarterly basis. Information: NPA posts detailed information on current and historical prices and price structures on its Web site, although subsidies at the refinery gate are not made explicit. Negative taxes are shown for kerosene, premix, and LPG, but their sizes are much smaller than the actual subsidies, hidden in the ex-refinery prices. Guatemala Pricing policy: Fuel prices are deregulated. Supply: There has been some confusion Information: Government posts on its Web site weekly surveys of about whether Guatemala is a member of gasoline and diesel prices in different parts of the country, average PetroCaribe. After the Guatemalan weekly prices of LPG by cylinder size and company, and daily president’s statement in early 2012 that his international prices and retail prices in the capital. Filling stations administration was considering joining the with lowest prices in the Guatemala City Metropolitan Area are accord, Venezuela replied that Guatemala highlighted with addresses and street maps every week. was already a member. Guinea- Pricing policy: The pass through of world price increases was full Supply: PetroGuin, the national oil Bissau in 2011 but only half in 2008–10. Government has since been company, is responsible for importing and adjusting fuel prices monthly, aiming at full pass through. Raising distributing all petroleum products. the import reference price for diesel further is part of the 2012 budget. There is a duty-free category for diesel, the volume of which government is trying to reduce. Honduras Pricing policy: By a 2007 executive decree, government sets Supply: Honduras severed its membership maximum retail fuel prices every week. LPG for household use is in PetroCaribe in Jan 2010, although subsidized. Venezuela stopped supplying fuel in Jun Information: Fuel prices used to be posted on the Web site of the 2009. The halting of fuel purchase under Petroleum Administrative Commission, but the site is no longer Petrocaribe had little or no impact on local functioning. fuel prices because the amount of imports under the accord was a fraction of the total imports. India Pricing policy: Subsidized fuels are provided only through state- Supply: India has 22 refineries with a √ owned oil companies. The administered pricing mechanism was combined capacity of 4.3 million bpd. dismantled in Apr 2002 except for kerosene and LPG for household Some are among the largest and most use. The price of household kerosene has been set at about Rs 15 sophisticated in the world. Unable to (US$0.28)/liter since October 2012, against the average FOB compete with state-owned oil companies benchmark price in the Arab Gulf of US$0.78/liter. Industrial users that are the only entities authorized to sell of kerosene pay more than triple those paid by households. Although subsidized fuels, India’s largest private oil gasoline and diesel prices are meant to be market-based, their prices company, Reliance Petroleum, closed down since fiscal 2004/2005 have been kept lower than what would have all of its 1,432 filling stations in 2008, and prevailed under market conditions. In 2003, government introduced earlier in 2005 Essar Oil closed its 1,250 a scheme for allocating price under-recoveries to upstream oil and filling stations. Essar has since re-opened gas companies, oil marketing companies, and cross-subsidization its stations. from gasoline and diesel, but low gasoline and diesel prices have Strategic reserves: In Dec 2011, the ruled out cross-subsidization since fiscal 2004/2005. Government government reported a plan to build introduced a price band mechanism with price adjustments every strategic petroleum reserves of nearly 18 two weeks in 2004, but abandoned it following steady increases in million tonnes, or 132 million bbl, by 2020, world oil prices. Government in Sep 2012 increased the price of expanding on a 5.3 million-tonne stockpile, diesel by Rs. 5 (US$0.09)/liter, steepest-ever once-time increase. the storage tanks for which are under Retail prices of diesel as charged by India Oil Corporation in New construction, to be used in case of supply Delhi and benchmark FOB prices relevant to India are shown below. disruptions or large price increases. At times retail prices have fallen below the FOB price, signaling a LPG supply to households: As of 2010, large subsidy. In 2008 and for half of 2012, retail prices were lower there were 120 million LPG customers and than FOB benchmark prices. 850 million cylinders in circulation. Government’s vision of covering 100% of population with gas has led to a target of adding another 50 million customers to increase coverage from 50% to 75%. Shortages: Regional fuel shortages occur, 47 Country E R Pricing policy and strategy Fuel supply conditions 60 especially LPG, as in Oct−Nov 2010. Reasons cited are often infrastructure- 50 related, such as pipeline repair and refinery closure. Diversion of subsidized kerosene Rs / liter of diesel 40 and domestic LPG for commercial use has also caused shortages. 30 Response to commercial malpractice: In 2006, a marker scheme aimed at curbing adulteration was introduced but later 20 suspended. In Jan 2011, the petroleum Arab Gulf FOB price minister announced that his ministry would, 10 within six months, re-introduce a chemical Retail in New Delhi marker to check diversion of subsidized 0 kerosene for adulteration of diesel, and Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 asked states to fit satellite tracking systems Governmetn in Sep 2012 also limited the number of subsidized LPG on tankers used by civil supplies refills to six a year per household. The price of LPG outside the departments. The marker system has not yet quota is more than double and that of LPG for commercial use triple been re-introduced. To address consumer the subsidized price. Price differences are considerable. In Jan 2013 complaints about adulteration, pilferage and in New Delhi, Indian Oil Corporation charged Rs 29 (US$0.53)/kg over-invoicing, Indian Oil Corporation for refilling 14.2-kg cylinders for the first six refills, Rs 66 announced in May 2011 that it would (US$1.22)/kg for 14.2-kg cylinders outside of the quota, Rs 81 automate fuel sale. Similarly, to curb (US$1.50)/kg for LPG sold in 14.2-kg cylinders to commercial adulteration and theft, Bharat Petroleum has customers, and Rs 83 (US$1.52)/kg for LPG sold in 19-kg cylinders. introduced Pure for Sure Platinum, which Rationing subsidized fuels: Subsidized kerosene is rationed: the includes automation and fitting delivery central government allocates kerosene to each state based on trucks with global positioning systems. historical consumption, and each state in turn has its own rules for kerosene allocation to households. Kerosene is sold through the Public Distribution System, the main function of which is to provide subsidized food to the poor. In addition to limiting subsidized LPG to six cylinders a year, the petroleum ministry is piloting a biometric scheme for distribution of subsidized LPG. The 2012/13 budget expands pilot programs, allowing eligible consumers to recoup LPG and kerosene subsidies via the Aadhaar platform (a 12-digit number which the Unique Identification Authority of India will issue for all residents in India). Social protection: Two separate government committees in 2006 and 2008 recommended moving away from subsidizing the kerosene price to cash transfers to the poor. In 2011, another proposal was made, shifting from a price subsidy to monthly cash transfers of Rs. 300 (about US$6.50) delivered to women. Consequences of subsidies: Compensation for losses suffered by the three state-owned oil companies marketing subsidized fuels was Rs. 120,000 million (actual, US$2.5 billion) in fiscal 2009/10 (Apr– Mar), Rs. 350,000 million (actual, US$7.7 billion) in fiscal 2010/11, Rs. 650,000 million (revised budget, US$13.6 billion, up from Rs. 200,000 million originally budgeted) in fiscal 2011/12, and Rs. 400,000 million (original budget, US$7.7 billion as of Apr 2012) in fiscal 2012/13, apart from US$0.6 billion set aside for LPG and kerosene in each fiscal year. In addition, oil and gas companies’ contributions have been considerable, amounting, for example, to US$6.6 billion and US$1.5 billion provided by upstream and downstream companies, respectively, in fiscal 2010/11. In the first quarter of fiscal 2012/13, the three downstream state-owned oil companies posted combined losses of Rs. 405 billion (US$7.5 billion) on fuel sales. Lack of timely reimbursement forces oil companies to borrow heavily. Diversion of subsidized kerosene to 48 Country E R Pricing policy and strategy Fuel supply conditions diesel and other users and of domestic LPG for commercial use has plagued the subsidy program for decades. Points of diversion of subsidized kerosene are well known and investigations have pointed to collusion by civil supplies officials and police. At least three murders, occurring in 2005 and 2011, have been linked to attempts to expose kerosene diversion, including the murder of an investigative journalist publishing a series of articles on diesel adulteration. Information: State-owned oil companies post detailed information on prices on their Web sites, together with price breakdowns and under-recoveries. Indonesia Pricing policy: The prices of one grade each of gasoline and diesel, Supply: Pertamina is the sole refiner in √ kerosene (for households and small businesses), and LPG are Indonesia. There are five refineries larger controlled and heavily subsidized. LPG sold in 3-kg cylinders is than 100,000 bpd. Only Pertamina can sell heavily subsidized at Rp 4,250 (US$0.44)/kg. LPG in 6-kg and 12- subsidized fuels, inhibiting market entry by kg cylinders is sold at Rp 5,950 (US0.62)/kg and LPG in 50-kg other oil companies. cylinders at Rp 7,455 (US$0.79)/kg. The prices of other grades of Shortages: In Jun 2011, Pertamina said that gasoline and diesel are market-based, but the national oil company diversion of subsidized fuels to industries, Pertamina, and not government, subsidizes LPG sold in larger driven by the very large price difference cylinders, reportedly costing Pertamina Rp. 3.8 trillion (US$0.43 between LPG sold in 3-kg cylinders and billion) in 2011. The price of LPG subsidized by government has LPG for industrial use, was creating fuel been frozen for years. After raising fuel prices twice in 2005 and shortages. once in 2008, government lowered the prices of gasoline and diesel Response to commercial malpractice: To (but not kerosene) in Dec 2008 and Jan 2009, and has not adjusted combat illegal purchase of subsidized prices since. In Mar 2012, the parliament voted to block petroleum products, President Yudhoyono government’s revised 2012 budget proposal to raise subsidized fuel announced in May 2012 that the prices and agreed to allow for the option of a price increase only if government was planning to start electronic the six-month average price of Indonesian crude oil rose 15 percent monitoring of subsidized fuel purchase. above the budget oil price (to US$121/bbl). Government sets an Pertamina started implementing the point- annual subsidized fuel sales quota and fuel subsidy budget, both of of-sale system, which records all fuel which are typically exceeded. Government revised its subsidized transactions made at filling stations, fuel quota in 2011 to 40.49 million kiloliters (kl) from the original including the identity of the vehicle and the volume target of 38.59 million kl, but the final figure was 41.8 customer, volume purchased, time of million kl, 8% higher than the original budget. The quota for 2012 purchase, and the location. The date and was 40 million kl, which was revised upwards as consumption volume will be used as a benchmark for exceeded 45 million kl. tracking the sales of subsidized fuels. There Shifting subsidy from kerosene to LPG: To reduce government’s has been little progress on implementation expenditure on the kerosene subsidy, Pertamina launched a to date. kerosene-to-LPG conversion program in May 2007, in which the coverage of areas where subsidized kerosene is being sold is being diminished to zero over time. The free starter package includes a stove, a 3-kg cylinder, a hose and a regulator. The program targets households and micro-businesses. In July 2012, Pertamina reported that it had distributed 54 million packages and saved Rp. 61.6 trillion (US$6.5 billion) in fuel subsidies since the start of the conversion program. It is not clear if these savings are net of (now much larger) LPG subsidies. Consequences of subsidies: Annual government expenditures on fuel subsidies soared to US$23 billion in 2012. Year 2006 2007 2008 2009 2010 2011 2012 US$ billion 7.0 9.2 14.3 4.3 9.1 18.8 22.6 % of GDP 1.9 2.1 2.8 0.8 1.3 2.2 2.6 Source: Government of Indonesia. Siphoning off LPG from small cylinders to transfer it to larger cylinders has been partially blamed for some of the series of LPG cylinder explosions―responsible for at least 22 deaths―in the early stages of kerosene-to-LPG conversion campaign. 49 Country E R Pricing policy and strategy Fuel supply conditions Rationing subsidized fuels: Despite a 2006 presidential decree forbidding consumption of subsidized gasoline and diesel by industrial consumers, downstream regulator at the time, BPH Migas, said in Sep 2010 that such consumption was continuing and ordered Pertamina to stop selling―BPH Migas estimated that industries consumed no less than 15% of the subsidized fuel quota. In May 2012, the Indonesian president announced new measures to contain fuel subsidies, including a ban on the purchase of subsidized fuels by state enterprises, government officials, plantation, and mining companies, and electronic tracking of sales of subsidized fuels. The impact of these measures on overall consumption has been limited. Social protection: In both 2005 and 2008, government carried out a time-bound, large-scale unconditional cash transfer program, intended to compensate the poor and near-poor for fuel price increases. After the sharp price increases in 2005, Rp 100,000 (US$11) a month was delivered to more than one-third of all households—numbering more than 19 million households—through the national postal system starting in Oct 2005 for a total of Rp 1,200,000 (US$128) in four tranches. The program was designed and deployed in less than five months. The cash transfers provided approximately 15% of households’ regular expenditures. The top four expenditure items using the cash transfers were rice, kerosene, debt repayment, and health, in that order. After more moderate but still significant price increases in May 2008, government again implemented cash transfers of Rp 100,000 a month to 18.5 million households starting in June 2008, this time for a total of nine months in three tranches. The administrative cost per recipient in 2008–2009 was 6% of the benefits received. Some households switched back to biomass from kerosene for cooking, in part because kerosene was more expensive and also because of kerosene shortages. Partly on account of compressed preparation and delivery schedules, implementation encountered several problems and invited complaints, of which the top three most commonly voiced were the lack of transparency in beneficiary selection, unfair distribution, and assistance given to those not eligible. Informal levies were extracted from the cash being transferred, amounting to one-fifth to one-third of the quarterly benefit. The frequency of deductions increased from about 10% in 2005–2006 to 50% in 2008–2009. These problems notwithstanding the just-in-time cash transfers have been widely credited for the price increases in 2005 and 2008 meeting with few protests. Nearly two-thirds of the cash went to the poorest 40%. The recipients showed slightly improved education, labor, and health outcomes. Iran, Pricing policy: Government controls and subsidizes fuel prices. Supply: Iran has nine refineries with a √ √ Islamic Parliament ratified the Targeted Subsidies Reform Act in Mar 2010, combined nameplate capacity of 1.45 Rep. calling for gradually increasing fuel prices to no less than 90% of the million bpd, but in varying states of Persian Gulf FOB prices between 2010 and 2015, and similarly disrepair after decades of subsidies. Only increasing natural gas, power, and water tariffs. The first price one is designed to produce significant increase was implemented in Dec 2010, and introduced three quantities of gasoline. A sizable portion of different price levels for regular gasoline and two for diesel, gasoline demand is met by imports, and depending on the consumer category. Prices in Iranian rials per liter economic sanctions have made it difficult are shown below: to match demand with supply because Iran Fuel Initial New price 1 New price 2 New price 3 can no longer import petroleum products in Regular gasoline 1,000 1,000 4,000 7,000 large quantities. This imbalance has forced Super gasoline 4,000 8,000 government to require petrochemicals Diesel 165 1,500 3,500 plants, which are not refineries and are not 50 Country E R Pricing policy and strategy Fuel supply conditions Note: US$1=Rls 10,616 in 2011 and 12,176 in 2012, but as high as designed to produce gasoline, to produce it. 35,000 in 2012 on the parallel market. Smuggling: Fuel is smuggled out of Iran For regular gasoline, government vehicles and those used mostly in along the borders with Pakistan, Turkey, agriculture and industry were in the first price category until Jun and Iraq, and southern coasts of Iran. In Feb 2011, after which this category was eliminated altogether; domestic 2012, the deputy director of the Department vehicles with an engine size smaller than 2 liters in the second, with for Campaign against Smuggling of Goods the engine size reduced to 1.8 liters in Jan 2013; and all others in the and Foreign Currency said that some 3 third. For diesel, public transport and industry are in the second million tonnes of fuel had been smuggled category and others in the third. There is a quota for each category, out of Iran since Mar 2011, significantly depending on vehicle type, size, and location. The large price lower than the corresponding period two increases invited much criticism from Parliament, which in 2012 years earlier. In Dec 2012, Oil Minister amended the Targeted Subsidies Reform Act to change “no less than announced that subsidized gasoline would 90%� of FOB prices to “no more than 90%,� thereby turning price no longer be available in the border areas. floors into ceilings and entrenching price subsidies. Parliament In Feb 2013, government was reported as rejected the proposal to increase prices in 2012, and depreciating having begun coding smart cards to prevent currency means that domestic prices are declining in real terms. misuse, particularly loaning smart cards to Nevertheless, it is significant that price increases as large as the ones smugglers, and selling gasoline at Rls effected in Dec 2010 were not rolled back. Government combined an 15,000 (US$1.22)/liter in the border areas. effective communication strategy with nationwide cash transfers to Official statistics further reportedly showed mitigate the adverse effects of price increases for petroleum products, that fuel smuggling declined from 10 natural gas, electricity, and water. million liters a day in 2008 to 3 million Social protection and compensation: To compensate for higher liters in early 2011, but, with currency energy prices, the reform law authorizes using up to 50% of the depreciation, rose to 8 million liters (6 savings from subsidy reduction for cash and in-kind payments to million of diesel and 2 million of gasoline) families, taking their income levels into account, and for a social a day by late 2012 and early 2013. security system; 30% of the savings to provide soft loans and credit lines to industries; and the remaining 20% to other government programs and infrastructure investment. In 2011, government did not target cash transfer to low-income households and instead paid Rls 455,000 (US$43 at the official exchange rate in 2011) a month to virtually all Iranians (about 73 million recipients), the total amount of which exceeded the savings from all the price and tariff increases of about Rls 30 trillion. Parliament in 2012 increased the allocation to cash transfers to families from 50% to 80%. Effect on demand: The consumption of every fuel fell in 2011, led by a 36% drop for fuel oil, 11% for LPG, and 10% for diesel. Apparent consumption, however, increased markedly in 2012. Iraq Pricing policy: Government initiated administered official price Supply: Iraq’s refineries are in disrepair √ √ adjustments at the end of 2005. Direct budgetary subsidies for after decades of heavy subsidies. imported fuels (except kerosene) were eliminated in 2007. Indirect Impact of power shortages: Gasoline subsidies for domestic crude/products were reduced from 10.5% of demand soared in 2010 as many turned to it GDP in 2006 to 1.5% in 2009, but remain (source IMF). to compensate for power shortages. Consequences of subsidies: Large differences between black Commercial malpractice: Black markets market and official prices persist. for petroleum products continue to flourish. Jamaica Pricing policy: Although petroleum product prices are deregulated Supply: Jamaica has a 35,000 bpd refinery, √ in Jamaica, ex-refinery prices continue to be set based on import owned by Petrojam. A PetroCaribe member parity prices. The current pricing mechanism is being administered since 2005, Jamaica imports oil from by Petrojam, which is government-owned. Government in Apr 2011 Venezuela at only 60% of the market price, reduced ad valorem tax on fuel, reinstituted in Jan 2010, from 15% with the remainder offset as a long-term, to 10% on a temporary basis, and said that it would be reviewed low-interest loan. As part of the quarterly. PetroCaribe agreement, Venezuela bought Information: Petrojam posts historical and current ex-refinery 49% of the shares in the refinery in 2008. prices, inclusive of taxes, on its Web site. Distribution margins are The planned expansion of the Petrojam added to the posted prices, and retail prices can be quite a bit higher. refinery would cost 10% of GDP in cumulative terms. The number of oil shipments per week under the PetroCaribe accord was reduced from 3 to 2 in May 51 Country E R Pricing policy and strategy Fuel supply conditions 2011. Jordan Pricing policy: Government controls fuel prices. Government Supply: Jordan has one refinery of about √ removed subsidies from all fuels except LPG in Feb 2008 and 100,000 bpd and imports 100% of its oil adopted a monthly price adjustment mechanism, but stopped demand. adjusting prices (of gasoline, diesel, and kerosene) in Jan 2011. Impact of natural gas shortages: The Gasoline, kerosene, and diesel prices were raised in Dec 2010, but pipeline carrying natural gas from Egypt to lowered in Jan 2011 in response to the events in Tunisia and Jordan has been repeatedly attacked, elsewhere in the region. An expert panel formed by the prime forcing Jordan to rely more on diesel and minister in May 2011 recommended smart cards for subsidized fuel oil for power generation. The finance goods instead of price subsidies. The kerosene and diesel prices ministry estimated that natural gas supply remained unchanged, except for a brief rise in Sep 2012. Until Nov disruptions in the first half of 2011 cost a 2012, the price of LPG sold in 12.5-kg cylinders had remained total of JD 637 million (US$0.9 billion). By frozen for years, except for four weeks in early 2009 when the price Apr 2012, there had been more than a was lowered slightly. In May 2012, Jordan raised the price of 95 dozen attacks since 2011, and Jordan RON gasoline to JD 1 (US$1.41)/liter from JD 0.795 (US$1.12), warned that the disruptions could cost more and substantially raised electricity tariffs for major industrial and than JD 1.5 billion (US$2.1 billion) in service sectors. In Nov 2012, unable to shoulder the growing budget 2012. deficit, government increased the price of LPG in 12.5-kg cylinders Oil price discount: Until 2003, Iraq by 54% and kerosene and diesel prices by 33%. Government began provided 100,000 bpd—half free and half at making monthly adjustments in Dec 2012 for all fuels except LPG. preferential prices—to Jordan. In 2006, Iraq The price of diesel for non-power users and average monthly agreed to supply 10,000–30,000 bpd of benchmark FOB price relevant to Jordan since 2008 are shown crude at a discount of US$18/bbl; delivery below. For a period of time, the retail price was lower than the FOB started in Oct 2007. The two countries price, signaling a large subsidy. negotiated a further discount of US$22/bbl 0.8 below the market rate in 2008 for 3 years for 10,000 bpd. The volume was increased 0.7 to 15,000 bpd in Jun 2011 but at a discount 0.6 of US$18/bbl. At the same time, Iraq began providing 30,000 tonnes a month of fuel oil JD / liter of diesel 0.5 at a discount of US$88/tonne. In Nov 2012, Iraq offered 100,000 bbl of free oil, and 0.4 reiterated its commitment to supply 33,000 0.3 bpd at a preferential price provided there is infrastructure in Jordan to transport the oil. 0.2 However, in Jan 2013, Iraq closed the Arab Gulf FOB price border citing security concerns in Jordan, 0.1 cutting off Jordan from 10,000 bpd offered Retail in Jordan 0.0 at a discounted price. Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Protests: The prices of 90 RON gasoline and diesel were increased in Sep 2012 but reversed within two days following street protests. The price increases in Nov 2012 were met with nation-wide protests, turning violent in some areas, killing one person, injuring 71, and quickly escalating into calls for a change of government. Government, however, did not roll back price increases. Consequences of subsidies: The fuel subsidies since 2005 have fluctuated by an order of magnitude from year to year: Year 2005 2006 2007 2008 2009 2010 2011 US$ million 707 394 432 278 61 94 714 % of GDP 5.6 2.6 2.5 1.3 0.3 0.4 2.4 Source: IMF. Information: Jordan Petroleum Refinery Company, a national oil company and Jordan’s sole refiner, posts current and historical fuel prices since 2008 on its Web site. Kazakh- Pricing policy: Government sets ceilings on retail prices and Supply: Kazakhstan is investing heavily in √ √ stan influences fuel prices. Retail prices have been frozen for months at a modernization and expansion of its refining 52 Country E R Pricing policy and strategy Fuel supply conditions time, for example the price of 92 RON gasoline in Astana between sector to boost capacity and improve August 2011 and March 2012. Because wholesale prices are not product quality over the next several years controlled, recently wholesale prices—governed in part by import for self-sufficiency. Revamping of its three prices—have exceeded retail prices. In Aug 2011, the oil ministry main refineries for modernization through and oil companies signed a memorandum to limit wholesale prices the end of 2015 has led Russia and to 87% of maximum retail prices. There is a preferential lower price Kazakhstan to sign a crude-for-fuel for diesel supplied to farmers. In 2012, the preferential price was agreement in 2012, whereby Russia 10–15% below the non-agricultural diesel price level. provides tariff-free petroleum products to Use of export ban to lower domestic prices: Regional shortages of Kazakhstan and Kazakhstan supplies crude gasoline and diesel have prompted government to introduce seasonal oil. Disagreement over the formula to export bans on petroleum products to ensure sufficient domestic calculate the amount of crude oil led supplies. In May 2010, government banned exports for six months. Kazakhstan in Jan 2013 to consider China The expiration of this ban has since been repeatedly extended, from for refined products through a tolling Nov 2010 to May 2011, July 2011, Dec 2011, Jul 2012, Dec 2012, arrangement. and most recently to end-Jun 2013. Shortages: Shortages in Jul–Aug 2009 in Use of export tax to lower domestic prices: Although not as high southern regions prompted the anti- as those in Russia, export duties are sizable, and were increased to monopoly agency to accuse oil companies US$114.05 /tonne in Aug 2011 for light products. of creating artificial shortages to push up Information: The Statistical Agency of Kazakhstan posts monthly prices and launch an investigation. The average prices of gasoline and diesel in 18 cities on its Web site. agency began investigating into 44 companies in July 2011, stating that there was no reason for price increases. Fuel shortages began in Apr 2011 caused by a price freeze imposed in Dec 2010, and continued into the summer as wholesale prices exceeded retail prices. Shortages continued to be reported in Oct 2011. Lower domestic prices than those in Russia also discourage fuel imports from Russia. Shortages of high-octane gasoline, one- third of which is imported from Russia, are common. Southern Kazakhstan experienced severe fuel shortages in Nov 2011. Fuel shortages were again reported in Mar 2012. Kenya Pricing policy: Kenya deregulated its oil industry in 1994. After Supply: There is one refinery in Kenya, √ concerns about over-charging by oil companies had been voiced in which is in need of rehabilitation and not several quarters, government in Dec 2010 began setting maximum capable of operating at anywhere near its retail prices by location every month for gasoline, diesel, and design capacity. During the first 9 months kerosene. Price calculations are based on volumes and costs in the of 2012, the refinery operated at a fraction previous three months. Government removed the VAT on LPG in of its capacity, meeting about 30 percent of 2005. In Apr 2011, government cut diesel and kerosene taxes by domestic demand. The product pipelines 20% and 30%, respectively, and in May 2011 eliminated all taxes are also in disrepair and outages are and levies on kerosene (as well as maize and wheat). Kerosene was frequent. Power shortages have on occasion nearly 20% cheaper than diesel in Jan 2013. The price difference shut down the refinery and the pipelines. between kerosene and diesel, and the tax difference between Bulk procurement: Effective Jan 2004, to products destined for the domestic market and those for export, are take advantage of economies of scale in two drivers of commercial malpractice. importation, government centralized the Information: The Energy Regulatory Commission posts landed purchase of certain petroleum products and costs of crude oil, gasoline, diesel, and kerosene, and maximum all crude oil through an open tender system pump prices allowed in 70 towns on its Web site every month. The coordinated by Ministry of Energy. Petroleum Institute of East Africa also posts industry statistics and Questions have been raised on and off in price and tax data, including statistics on the results of fuel Kenya about whether its bulk procurement marking―kerosene marker and export marker―and tracing tests. system actually results in cost savings. For The results from 2012 found that independents were more likely to example, in May 2011, Ministry of Energy be in violation than integrated companies. reportedly blamed high fuel costs on the refiner’s having to go through a third party to procure crude oil and manipulation of the crude oil prices by traders who alter the 53 Country E R Pricing policy and strategy Fuel supply conditions dates when crude oil enters the country. Restrictions on private importers: Citing private imports as the primary causes of congestion at the port of Mombasa and attendant demurrage charges, government in Sep 2010 banned private imports for transit fuels to Uganda, Rwanda, and the Democratic Republic of Congo, and mandated the open tender system for these transit fuels. Government lifted this requirement in Jan 2011, but banned private importers from using pipeline transport. Stockholding: 2008 regulations mandate minimum operational stock for various products, including 25 days for diesel, 20 days for gasoline and kerosene, and 15 days for LPG. Strategic reserves: 2008 regulations provides for 30 days of consumption to be procured by National Oil Corporation of Kenya and stored by Kenya Pipeline Company initially and gradually increased to 90 days, all to be funded by monies appropriated by Parliament. Shortages: There are frequent fuel shortages due to unplanned refinery outages, pipeline leaks, power outages affecting the refinery and/or pipeline operation, delayed ship unloading, and attacks on infrastructure. In Dec 2011 alone, there were two attacks on towers supplying electricity to the oil pipeline to steal steel, causing fuel shortages. Response to commercial malpractice: Fuel marking was first implemented in 1998 to curb the illicit adulteration of domestic Kenyan fuel with fuel destined for export to surrounding countries. The Petroleum (Amendment) Rules, 2000, stipulate that all fuels intended for export (except jet fuel) and illuminating kerosene for sale in Kenya be chemically marked. In Mar 2009, government started mandatory inspection of all fuel discharged at Mombasa. Lao PDR Pricing policy: Ministry of Industry and Commerce controls Supply: Aside from Lao State Fuel gasoline and diesel prices by region, and also LPG prices, which are Company, there are several private adjusted less frequently than gasoline and diesel prices. The ministry companies operating in the country. reported subsidizing fuel prices in the first half of 2008. Prices were Fuel tourism: Consumers go to Thailand to adjusted 18 times in 2009, 14 times in 2010, 15 times in 2011, and buy subsidized LPG. and 14 times in the first 10 months of 2012. In Apr 2011, the ministry reported that government would do its best to keep the diesel price below 10,000 kip (US$1.24)/liter and regular gasoline below 11,000 kip (US$1.37), using such short-term measures as taxing premium gasoline more to cross-subsidize diesel to curb inflation, and has been following this policy. A fuel surcharge was added in Oct 2011 to make up for removal of bridge tolls earlier in 54 Country E R Pricing policy and strategy Fuel supply conditions 2011. Information: Lao State Fuel Company, which is government- owned, used to post historical gasoline and diesel prices in the capital and five provinces on its Web site dating back to 2000. As of Feb 2013, the oil price history page was shown as being under construction and only current prices in 16 provinces were shown. Liberia Pricing policy: Ministry of Commerce and Industry sets price Supply: Liberia Petroleum Refining ceilings for gasoline, diesel, and kerosene. In Apr 2012, government Company, wholly owned by government, is eliminated customs duties on fuels for schools, clinics and hospitals mandated to supply petroleum products to that are deemed by the minister of finance to be inadequately the domestic market. Despite its name, it covered by budgetary appropriation or subsidies, as well as Liberia does not operate a refinery. Electricity Corporation, Liberia Broadcasting System, and National Transit Authority. Information: Ministry of Commerce and Industry announces new wholesale and retail prices of gasoline, diesel, and kerosene on its Web site. Madagas- Pricing policy: A law issued in 2004 deregulated the downstream Supply: Madagascar is a small island car petroleum sector, including pricing. Retail price adjustments, economy that relies entirely on product however, began to lag behind world price movements in 2008. imports. Supply costs are high because of Starting in 2011, maximum prices were set by decrees and prices small demand, less than 15,000 bpd in were also negotiated between government and oil companies to 2012. stabilize them. There were only two adjustments in 2011 and three Shortages: In Jun 2011, government in 2012. To keep prices low, government has reduced import tariffs accused oil companies of creating artificial and road maintenance fees. There is an equalization fund. Oil fuel shortages and selling fuel on the black companies reported that government provided 15 billion ariary market, and opened an investigation. (US$7.4 million) in 2011 for keeping prices below market levels, against losses amounting to 150 billion ariary. Information: The Malagasy Office of Hydrocarbons (OMH) posts historical prices dating back to 2000. Malawi Pricing policy: Automatic price adjustment mechanism was Shortages: Malawi suffered fuel shortages suspended in 2004 and resumed in Jun 2012. Government sets in 2009, lasting almost two months. A maximum retail prices, uniform throughout the country, for serious diesel shortage began in Sep 2010. gasoline, diesel, and kerosene every month. The prices are adjusted Gasoline and diesel shortages intensified in when landed costs in local currency vary by more than ±5%. When Nov 2010 and continued into 2011. By the variation is less than ±5%, a price stabilization fund is used. early 2011, black-market fuel prices were There are numerous fuel levies: energy regulation levy to finance reported to be more than double official the activities of the Malawi Energy Regulatory Authority (MERA), prices. The finance minister told the road levy, Malawi Bureau of Standards cess, safety net levy which parliament that commercial banks did not contributes to development projects for the poor including a honor letters of credit on time because of scarcity of foreign exchange. Government fertilizer subsidy program, and contribution to the price stabilization fund. The price of kerosene for domestic use has been frozen at MK rationed fuel in response. Serious fuel 171 (US$0.47)/liter, against MK 591.4 (US$1.64)/liter for other uses shortages occurred in Feb 2012. MERA and MK 683.6 (US$1.90)/liter for diesel in Feb 2013. indicated in its 2010 report that kerosene Protests: Fuel and foreign exchange shortages led to deadly protests imports had dropped by 22.5% from 2008 in Jul 2011. to 13.9 million liters in 2010. Information: MERA posts new fuel prices on its Web site. Stockholding: Government’s strategic plan for the energy sector for 2009–2012 sets as one objective promotion of minimal storage capacity to 30 days for every oil marketing company. MERA reported in 2010 that it was planning to increase the country’s fuel storage facilities from less than 10 days to 30 days of fuel import cover. Malaysia Supply: Malaysia has several large √ √ Pricing policy: Gasoline, diesel, and LPG are among controlled refineries. In May 2009, 92 RON gasoline goods. Prices of 95 RON gasoline, diesel, and LPG prices for was withdrawn and replaced with 95 RON. residential consumers have been frozen since Dec 2010. In Jul 2010, Diversion and smuggling: LPG for non- 55 Country E R Pricing policy and strategy Fuel supply conditions government stopped subsidizing 97 RON gasoline. The price residential use is nearly twice as expensive difference between 97 RON and 95 RON gasoline has widened since, as that for households, leading to diversion. from RM 0.25 (US$0.08)/liter to RM 0.80 (US$0.26)/liter in early Illegal diversion of subsidized diesel has 2013. In May 2010, a five-year plan to cut subsidies that could save been reported. Vehicles and even US$31 billion was proposed, but not approved by government which motorcycles with modified fuel tanks to feared a voter backlash ahead of general elections in 2013. Retail carry more fuel have been caught. diesel prices and average monthly benchmark FOB prices relevant to Response to fuel tourism and out- Malaysia since 2007 are shown below. After two relatively sharp smuggling: Effective Dec 2009, foreign price spikes followed by rapid reductions in 2007 and 2008, the retail motorists are allowed to refuel a maximum diesel price has essentially been frozen since 2009. The plot shows a of 20 liters within a 50-kilometer radius large subsidy, especially in the last two years. from the country’s borders; filling stations 4.0 selling more than 20 liters would have their licenses revoked and the foreign cars would 3.5 be confiscated. Vehicles from Singapore cannot fill their fuel tanks more than ¾ full. Ringgit / liter of diesel 3.0 Response to commercial malpractice: In 2.5 Aug 2012, government announced that, in order to reduce abuses by fishermen 2.0 receiving subsidized fuel for their boats, a 1.5 representative of Malaysian Fisheries Development Authority would verify each 1.0 catch landed, and those with insufficient Singapore spot price catch would no longer be permitted to buy 0.5 Retail in Malaysia the lower-priced fuel. 0.0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Prices in remote areas are higher and government has been taking steps to implement a “one nation, one price� policy to equalize prices across the country. An additional diesel subsidy scheme for eligible commercial vehicles and river passenger boats was introduced in the 2002 budget. Four groups of consumers have been entitled to additional diesel price subsidies: fishing boats, which paid the lowest price per liter; passenger river boards; fleet card holders; and public transport operators. In Jun 2011, government suspended the additional subsidy scheme for nine vehicle categories and certain fishing boats. Consequences of subsidies: Annual subsidies for the three fuels increased to US$6.6 billion by 2011, with gasoline and diesel dominating in most years. Year 2005 2006 2007 2008 2009 2010 2011 US$ billion 2.2 2.0 2.6 4.6 1.6 2.8 6.6 % of GDP 1.6 1.3 1.4 2.1 0.8 1.2 2.4 Source: Government of Malaysia. Energy subsidies have remained high in 2012, but increased revenues from high oil prices and strong tax collection have more than offset subsidy increases. Hedging: Malaysia Airlines lost US$183 million from fuel hedging in the first three months of 2009. Information: Ministry of Domestic Trade, Cooperatives, and Consumerism posts information on fuel price subsidies every month on its Web site, including comparison of retail prices in Malaysia with those in the neighboring countries. Mexico Pricing: Retail price adjustments are decoupled from world price Supply: Mexico’s national oil company, √ √ movements and smoothed by adjusting the special tax on production Pemex, is the sole refiner. Its refinery and service. For gasoline and diesel, this tax was negative for three modernization and capacity expansion years until May 2009, when it became positive gasoline, and has projects have experienced substantial 56 Country E R Pricing policy and strategy Fuel supply conditions been negative since Jun 2009 for gasoline and since Jul 2009 for delays. Despite being a significant oil diesel. In 2012, the special tax averaged –US$0.22/liter for regular exporter, Mexico is a significant importer gasoline, –US$0.23 for diesel, and –US$0.30 for premium gasoline. of petroleum products. In 2012, Mexico Regular gasoline and diesel prices were raised at a nominal annual imported 30% of its LPG, 32% of diesel, rate of 10–11% in 2010, 2011, and 2012. In 2007, the price of diesel and 40% of gasoline consumption. rose by only 4% and gasoline by 5%. The price of regular gasoline grew at only 7% in 2008 and 6% in 2009, but the price of diesel rose by 21% and 16%, respectively. The pace of increase has not been enough to catch up with rising world prices since 2010. Monthly average retail diesel prices and benchmark FOB prices relevant to Mexico are shown below. It is clear that, although not as large as in 2008, a sizable subsidy continues. 12 10 Mex$ / liter of diesel 8 6 4 U.S. Gulf Coast spot price 2 Retail in Mexico 0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 When the benchmark LPG prices in Belvieu, Texas, United States, are high, LPG prices in Mexico are kept below import-parity levels, despite Mexico’s being a large net importer of LPG. Under Mexico’s climate law, passed in Apr 2012 and only the second in the world after UK’s Climate Change Act of 2008, government will formulate rules to phase out fossil fuel subsidies. Consequences of subsidies: The annual implicit subsidy in 2011 for LPG alone amounted to MXN40 billion (US$3.2 billion). Pemex has had trouble moving refinery projects forward, turning Mexico into a significant importer of petroleum products. Hedging: Although different from hedging petroleum product prices to protect consumers, Mexico hedges crude exports every year to protect fiscal revenues. Government achieved remarkable success by hedging crude oil exports in 2009, spending US$1.5 billion for hedging contracts and earning US$5 billion in return. Information: Ministry of Energy posts detailed price information on petroleum products. For LPG, Ministry of Energy regulates transport and distribution tariffs, and Ministry of Economy gazettes maximum consumer prices in 145 distribution zones every month. Mongolia Fuel pricing policy: Fuel prices were deregulated until 2012. Supply: Mongolia imports petroleum Government frequently adjusts excise taxes on fuels to keep prices products from Russia, China, Kazakhstan, stable. A proposal to regulate gasoline prices was accepted and a and, starting in 2012, the Republic of price control council was established in Jan 2012 to regulate Korea. Historically, Mongolia has imported gasoline, food, and public transport prices. The Bank of Mongolia in primarily from Russia. late 2012 granted soft loans totaling US$120 million to fuel Shortages: After Russia started restricting importers to keep prices low. exports, Mongolia experienced serious fuel shortages in the summer of 2011, with China (diesel) and Kazakhstan (gasoline and diesel) also imposing export bans. Stockholding: Government tries to ensure fuel reserves of 30–40 days. 57 Country E R Pricing policy and strategy Fuel supply conditions Morocco Pricing policy: Government controls and subsidizes fuel prices and Supply: Domestic refining meets about √ adjusts them infrequently. The price of LPG has been frozen since three quarters of demand and the rest is 1995, and other fuel prices were not adjusted between 2008 and Jun imported. 2012, when the sharpest price increases in years were implemented In-smuggling: Fuels are smuggled from for gasoline, diesel, and industrial fuel. The Compensation Fund Algeria into Morocco. (Caisse de Compensation) pays for subsidies for certain commodities, including petroleum products, sugar, and wheat. Social protection: Under draft plans released in Jan 2013, the subsidy system would be fully or partially replaced with monthly cash payments of DH 1,000 (US$116), with the new program potentially taking effect as early as June but taking about four years to implement rather than a sudden one-off hike in prices. Consequences of subsidies: Subsidies for petroleum products including LPG increased to US$5.4 billion by 2011, of which diesel had the largest share at 47%, followed by butane at 30%. Year 2007 2008 2009 2010 2011 US$ billion 1.3 3.2 0.9 2.9 5.4 % of GDP 1.7 3.6 1.0 3.2 5.3 Source: Caisse de Compensation. Because of the magnitude of the subsidy and the pricing policy that sets the same unit price independently of cylinder size (3, 6, or 12 kg), household use of LPG is virtually universal and there are many 3-kg cylinders in circulation, against the backdrop of most other LPG markets elsewhere having opted for 10–15-kg cylinders because of large economics of scale associated with cylinder size. Mozam- Pricing policy: A 2006 decree provides for government control of Supply: Petromoc was the sole importer bique prices of gasoline, diesel, kerosene, and LPG. Petroleum product until 1998, but had run up sizable losses. Its prices are reviewed every month and maximum retail prices in cities monopoly position was abolished and with terminals are published. For other areas, transport costs are replaced by Imopetro, owned jointly by added. Energy and finance ministers handle fuel prices as long as main fuel distributors. A 2006 decree price changes are smaller than 20%; if changes are larger, Council specified that Imopetro be the sole importer of Ministers is responsible for determining prices. Government used of petroleum products, but the decree was to adjust fuel prices every month according to a market-based amended in Mar 2009, giving government formula. VAT and fuel tax are not levied on kerosene. The diesel the authority to designate an alternative fuel tax is halved for agriculture, fisheries, and power generation. In importer. Until May 2012, government had response to the food and fuel price shock of 2008, government a public tender system for LPG, but the introduced an urban transportation subsidy in Feb and suspended system was abandoned in favor of fuel-related taxes until Jul 2009. Government froze fuel prices in appointing Petromoc as the sole supplier. Apr 2009 and asked fuel importers to sell below market prices. In Shortages: In Jul 2009, fuel distributors Mar 2010, government began raising fuel prices gradually. The stopped selling because they were not being prices of petroleum products other than diesel were increased by reimbursed for price subsidies, creating more than 70% and reached market levels by Aug 2010; diesel severe fuel shortages. In 2011, serious LPG prices were raised by 38% to May 2010 but not raised further, shortages were experienced when South incurring losses. In Feb 2010, an agreement between government Africa, from which Mozambique imports and fuel importers to settle outstanding claims for 2008–09 came LPG, ran out of LPG. into effect. Government also paid compensation for below-market Maritime security: To fight piracy, which fuel prices in 2010 until end-May. Government in Dec 2010 paid resulted in increased transport costs, fuel importers fully for the losses incurred in that year by charging other prices, and insurance bills, Mozambique, petroleum products more to cross-subsidize diesel. Government South Africa, and Tanzania in early 2012 increased gasoline and diesel prices by 10% in Apr 2011 and 8% in signed a tripartite pact to strengthen Jul 2011, but has not adjusted fuel prices since. Government had maritime security in the Indian Ocean. hoped to phase out fuel subsidies by the end of 2010, but the events in the Middle East and North Africa were considered extraordinary and government extended the phase-out date. In Feb–Apr and Aug– Sep 2012, world fuel prices rose above the Jul 2011 levels, again leading to losses. In Oct 2012, government completed payments to importers for fuel subsidies incurred in 2011. 58 Country E R Pricing policy and strategy Fuel supply conditions Consequences of subsidies: Compensation paid by government, including arrears, is shown below: Year 2009 2010 2011 2012 US$ million 102 138 141 95 % of GDP 1.1 1.5 1.1 0.6 Source: IMF. Social protection: Government in Mar 2011 announced a subsidy program targeting 1.8 million poor people in 11 provincial capitals that would include bus passes for workers, students, and the elderly. Urban transport vouchers were introduced in 2012. Compensation: Urban public transport is reimbursed for the price difference between the diesel price in effect and Mt 31 (US$1.03)/liter. Namibia Pricing policy: A 1990 act regulates gasoline and diesel prices, and Supply: Namibia imports petroleum Ministry of Mines and Energy (MME) announces retail prices of products from South Africa. gasoline and wholesale prices of diesel by location once a month. Shortages: LPG shortages in South Africa The National Energy Fund subsidizes fuel supply to remote areas, in 2011 affected Namibia. and in addition has been used to subsidize regulated fuel prices from time to time. Information: Prices of gasoline and diesel are posted on MME’s Web site every month. Nepal Pricing policy: Government controls fuel prices and subsidizes Supply: NOC is the sole importer of diesel and LPG, and at times kerosene. Prices of kerosene and diesel petroleum products and Indian Oil have been equalized since Nov 2008. Kerosene, but not diesel, is Corporation is the sole supplier to NOC. exempt from a VAT of 13%, a road maintenance cess of Rs 2 Costs of supply are high because Nepal is (US$0.02)/liter, and a pollution charge of Rs 0.5/liter. Protests landlocked and fuel imports are trucked. following the fuel price increases on Jan 18, 2012, forced Cash-strapped as a result of mounting government to reduce prices on Jan 26. To make up for losses, losses from price control, NOC has not Nepal Oil Corporation (NOC), wholly owned by government, been able to pay its bills to IOC, prompting introduced higher diesel prices for bulk and industrial users in Aug IOC to withhold delivery. 2008 but withdrew dual pricing in Oct 2008. NOC re-introduced Effect of hydropower on diesel demand: dual pricing of diesel in Jan 2012, whereby those consuming more Hydropower shortage in 2008 forced than 4,000 liters a week are charged markedly higher unit prices. In government to turn to emergency diesel early 2011, following a government decision, NOC began providing generation after extended load shedding. subsidized diesel to factories and hotels, offering a discount of Rs The quantity of diesel imports doubled in 1.80 (US$0.02)/liter. On Feb 12, 2013, NOC raised the price of LPG just two years between fiscal 2007/08 (Jul by 43%, but after meeting with various student unions rolled back 16–Jul 15) and fiscal 2009/10. the price increase on Feb 24, citing lack of preparation of color- Shortages: There are frequent fuel coded cylinders and consumer cards. Retail prices of diesel in shortages, in part because of NOC’s Kathmandu and benchmark FOB prices relevant to Nepal since 2007 inability to pay for fuel imports. Diesel are shown below. The plot shows that the largest subsidies were shortages prevent backup power generation provided in 2008. from running, affecting industries, but rising demand for diesel for power generation is one reason for diesel shortages. Because diesel is subsidized, the more NOC imports, the larger the loss, and hence NOC cut diesel imports in 2011 while trying to increase gasoline imports, on which NOC earns a profit. LPG imports have also been curtailed to reduce NOC’s losses, creating LPG shortages. Serious fuel shortages began in Dec 2011, and by Feb 2012, lack of power, diesel (for school buses), and LPG (for cooking) threatened school closure. India was also facing LPG shortages at the time. Black market prices have been higher than official prices as a 59 Country E R Pricing policy and strategy Fuel supply conditions 120 result. There have been charges of artificial Arab Gulf spot price shortages to push up prices. 100 Response to commercial malpractice: NPR / liter of diesel Retail in Kathmandu NOC in Apr 2012 began distributing red (1.5 million for households) and blue (0.5 80 million for commercial consumers) LPG cards. Only red-card holders are eligible for 60 subsidized LPG after card distribution is completed. After 5 months, NOC had 40 completed verification of only 5,000 consumers. 20 0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 In Sep 2012, government announced that students in state colleges would be entitled to price discounts, over and above the subsidies already provided, on four LPG cylinders a year and 10 liters of kerosene a month. In response, students changed the planned one- day strike to protest against price increases on Sep 2 to half-day. This discount program has not been implemented. Consequences of subsidies: NOC has been reporting large monthly losses, reaching as high as US$18 million in Jan 2012. In recent months, losses have been dominated by underpricing of LPG. In Dec 2012, NOC proposed a new subsidy mechanism for LPG, which would limit price subsidies to households only who would be entitled to one 14.2-kg cylinder a month at the subsidized price, and deliver the subsidy through a post-purchase cash refund. LPG cylinders for households would be colored red, and other cylinders blue, in addition to households receiving red cards and all other consumers blue cards. Protests: Protests against fuel price hikes by students are common. Information: NOC posts historical fuel prices going back to 1996, current prices at 13 locations, monthly losses for each fuel per liter and in total, and the price structure for each fuel. In 2012, the highest monthly loss occurred in Apr, amounting to US$19 million. The frequency of retail price adjustments is shown below: Year 2008 2009 2010 2011 2012 Gasoline 5 1 4 3 6 Diesel and kerosene 4 3 5 3 7 LPG 2 1 2 0 3 Nicaragua Pricing policy: Prices were deregulated in 1999 except LPG, for Supply: PetroCaribe member. √ which maximum prices are set by location. When Tropigas, which Stockholding: There is a minimum controlled 60% of the LPG market at the time, asked for a 100% stockholding requirement of 10 days of price increase amidst serious LPG shortages, the president in Sep supply. 2008 declared an economic state of emergency for six months, authorizing Nicaraguan Institute of Energy to import and sell LPG. The state of emergency was repealed in Jan 2009. Information: Instituto Nicaragüense de Energía (Nicaraguan Institute of Energy) posts the average prices of three deregulated products—gasoline, diesel, and kerosene—surveyed at about 75 filling stations in Managua every week, and provides details on the three highest-priced and three lowest-priced filling stations as money-saving tips. Niger Pricing policy: Prices have been uniform throughout the country Supply: The first refinery in the country √ since Aug 2001. Beginning in Jan 2012, gasoline and diesel prices began operating in Nov 2011, together with 60 Country E R Pricing policy and strategy Fuel supply conditions are set by a ministerial decree. Prices were adjusted once in 2009 domestic oil production. and 2010, and four times in 2011. In Jan 2012, prices of all fuels except kerosene were lowered, and were not adjusted for the rest of the year. In Jan 2013, the prices of gasoline and diesel were lowered, while kerosene and LPG prices did not change. An energy fund, created in 1994, has taken a few francs a liter from gasoline and diesel and cross-subsidized LPG. Fuel subsidies amounted to US$29 million in 2009 (0.5% of GDP), US$61 million in 2010 (1.1% of GDP), and US$70 million in 2011 (1.2% of GDP). With the start-up of oil production and refinery operation in 2011, explicit fuel price subsidies were eliminated in 2012 (source IMF). Protests: The start-up of the refinery in Nov 2011 raised expectations about dramatic reductions in the prices of petroleum products. When the reductions did not occur, protests broke out against the high cost of living and turned violent in Dec 2011. Government in Jan 2012 in response increased civil service pay by 5–10% and reduced electricity tariffs by 25% and water by 5%. Information: SONIDEP (Nigerien Petroleum Products Company) posts current and historical prices going back to 2001 on its Web site. Nigeria Pricing policy: Gasoline prices are uniform, controlled by Supply: Years of subsidies and √ √ government, and infrequently adjusted. The gasoline price was mismanagement have left the refining ₦65/liter between Aug 2005 (US$0.50) and Dec 2011 (US$0.41), sector in Nigeria in disrepair, forcing the except in 2007 and 2008 when it was raised to ₦75/liter for a month world’s eighth exporter of crude oil to and then lowered to ₦70/liter. Diesel prices have been deregulated become a significant importer of petroleum for several years. Government removed the gasoline subsidy on Jan products. In Nov 2012, government said 1, 2012 and allowed the retail price to rise above ₦140 that attacks on petroleum product pipelines (US$0.88)/liter or higher, but following widespread protests lowered cost Nigeria ₦105 billion (US$7 billion) a it within two weeks to ₦97 (US$0.61), still representing a 49% year. There are significant delays in increase from the price in 2011. A Jun 2009 presidential directive discharging fuel at ports, incurring deregulated the price of kerosene for household use, but Nigerian considerable demurrage charges; gasoline National Petroleum Corporation (NNPC) continues to sell kerosene unloading of 20-40 days was said to be at a heavily subsidized price of ₦50 (US$0.32)/liter and receive common until 2012, when imports dropped reimbursement from government. The kerosene price is about one- and the waiting time was reduced to more third of the market price and the subsidy is intended to help poor like three weeks. households with lighting and cooking. Shortages: Attacks on oil pipelines and Regulatory agencies: Petroleum Products Pricing Regulatory disagreement between oil companies and Agency (PPPRA) manages Petroleum Support Fund (PSF), which government over subsidy payments have was established in Jan 2006 to stabilize domestic fuel prices. With resulted in frequent acute fuel shortages. the Central Bank of Nigeria as the custodian of the fund, PSF Following government’s decision to no follows the principle of under-recoveries to be reimbursed and over- longer include the subsidy provision in the recoveries to be paid into the fund, based on international costs, 2009 budget, private oil marketers stopped charges, and controlled profit margins using a pricing template. importing, causing serious fuel shortages. Petroleum Equalization Fund Management Board equalizes Delays in reimbursements continued to transportation costs for pan-territorial pricing. PPPRA approves discourage imports, and serious fuel import quotas for gasoline and eligibility for subsidy reimbursement. shortages were reported in late 2009 and Social protection: Leading up to the removal of the gasoline early 2010, when it was also reported that subsidy in Jan 2012, government developed a Subsidy Reinvestment marketers were not importing because of and Empowerment (SURE) program. The objective of the SURE uncertainties about when deregulation program is three-fold: to mitigate the immediate impact of subsidy would be announced. Shortages continued removal, accelerate economic transformation through investing in in Jan 2012, after licenses were suspended critical infrastructure, and lay a foundation for a national safety net following the investigation in the House of program. Social protection mechanisms under SURE include Representatives. Serious shortages were maternal and child health services, public works for women and experienced particularly in the last quarter youth, urban transport development, and vocational training. of 2012. Serious and continuing kerosene However, the full document was not issued until Nov 2011, less than shortages have meant that consumers rarely two months before the subsidy removal, giving inadequate time for benefit from the large unit price subsidy, and black market prices could even exceed 61 Country E R Pricing policy and strategy Fuel supply conditions communication and preparation of the mitigation measures. The US$2/liter at times, several times the 2013 budget allocates ₦273.5 billion (US$1.7 billion) for the SURE official price. program. Smuggling: Fuel is smuggled to Benin, Protests: Gasoline pricing has been highly politicized in Nigeria and Cameroon, and other countries. The labor unions strongly oppose deregulation. Immediately after the gasoline price increase in Jan 2012 led to price increase in Jan 2012, the unions staged an eight-day strike, fuel shortages and price hikes in the estimated to have cost the economy more than US$1 billion. neighboring countries, which were relying Consequences of subsidies: Fuel subsidies (implicit and explicit) on cheap smuggled fuel from Nigeria. increased six-fold in local currency between 2006 and 2011 and surpassed US$11 billion in 2011, constituting 4.7% of GDP: Year 2006 2007 2008 2009 2010 2011 US$ billion 2.0 2.3 5.4 2.7 5.3 11.4 % of GDP 1.3 1.4 2.6 1.6 2.3 4.7 Souces: IMF for 2006–2010, and the Central Bank of Nigeria as cited in Nigeria (2012) for 2011. A market with deregulated diesel and regulated gasoline prices is unusual, leading to much greater apparent consumption of gasoline than diesel. According to IEA data, the gasoline-to-diesel consumption ratio increased from 2 in 2000 to 7 in 2010, nearly triple the second highest ratio in the world (United States) and possibly suggesting increasing smuggling of subsidized gasoline. Five illegal alternative markets for subsidized kerosene have been reported in the media: (1) much higher prices of kerosene on black markets, (2) adulteration of diesel with kerosene, (3) diversion of subsidized kerosene for household use to the aviation fuel sector, (4) out-smuggling to neighboring countries, and (5) presenting subsidized kerosene as having just been imported to claim the subsidy reimbursement for the second time. In Dec 2011, Major Oil Marketers Association of Nigeria warned that selling household kerosene as jet aviation fuel posed a serious safety threat. The scale of corruption also discredits government’s argument that savings from subsidy removal can be used more productively and equitably. A former secretary general of a workers’ union captured this sentiment as follows: “Until they stop corruption, all these ideas will not work… Nigeria is rich, we have money.� Investigations into subsidy abuse: Protests against the gasoline subsidy removal in Jan 2012 and criticisms of the poor governance in the sector led to establishment of several government committees and task forces in 2012: • In Jan, the House of Representatives named an eight-member ad hoc committee led by Hon. Farouk Lawan to probe the subsidy regime between 2009 and 2011�to verify and determine the actual subsidy requirements and monitor the implementation of the subsidy regime in Nigeria.� The committee’s report, submitted in Apr, pointed to abuses on an enormous scale and massive overpayments in 2011. Against the appropriated sum of ₦245 billion (US$1.6 billion), the committee found effective subsidy payments amounting to ₦2,587 billion (US$16.7 billion). The number of eligible importers increased sharply from six in 2006 to 140 by 2011. Many transactions appeared suspect. However, a bribery allegation against Hon. Lawan led the executive branch to establish its own committee. • Federal Ministry of Finance set up a committee in May to scrutinize the fuel subsidy payments in 2011. Headed by Aigboje Aig-Imoukhuede, a member of the Economic Management Team, the committee submitted a report in July, claiming that marketers and importers had committed 17 infractions at a cost of ₦423 62 Country E R Pricing policy and strategy Fuel supply conditions billion (US$2.7 billion) in overpayments. • Protests by marketers that they had not been invited by the technical committee to challenge the allegations prompted establishment in July of a Presidential Committee on Verification and Reconciliation of Subsidy Payments, also headed by Aig- Imoukhuede. This committee lowered the estimates of the overpayments to ₦382 billion (US$2.5 billion), indicting 25 companies. One of the committee’s recommendations was to verify shore tank certificates and records of sales proceeds. • President Jonathan directed the committee to implement the above recommendation. The report submitted in Nov indicated that transactions of 50 companies, amounting to ₦232 billion (US$1.5 billion), had not been legitimate. Information: PPPRA’s Web site posts the pricing template for gasoline and kerosene, indicating the magnitude of under-recoveries. The status of PSF after 2008 is difficult to find on PPPRA’s Web site, although it is available through Oct 2011. Pakistan Pricing policy: Ex-depot prices of automotive diesel have been Shortages: When maximum fuel prices √ deregulated since Jun 2002. Government was setting ceilings for ex- were set by government, fuel shortages depot prices of other fuels based on an import-parity formula until were common just prior to price revision. Jun 2011, when these prices were also deregulated except kerosene. Gasoline shortages in early Jan 2009 Ex-refinery prices cannot exceed the average of Pakistan State Oil’s prompted demonstrations across Pakistan. (PSO) import prices in the preceding two weeks, excluding PSO There was an accusation that dealers import incidentals. If PSO prices are not available, ex-refinery prices stopped buying fuel in late Jan 2009 in are based on an import-parity formula. For LPG, government sets anticipation of a price decrease, leading to ceilings for ex-refinery or ex-processing plant prices of domestically fuel shortages, and prospects of a price produced LPG but not imported LPG. In 2012, Ministry of increase in early Sep 2009 also reportedly Petroleum and Natural Resources reported on its Web site that fuel led to many filling stations stopped gasoline prices were being subsidized through adjustments in the Petroleum sale. In Sept 2010, oil marketing companies Levy. E10 has higher octane and is cheaper than pure gasoline. said that not being able to recover costs on Hedging: In Aug 2009, State Bank of Pakistan rejected the finance account of late payments by consumers and ministry’s proposal to hedge oil prices for a year. Hedging losses of price differential claims prevented them suffered by the Pakistan International Airlines in 2008 were from complying with stock requirements. questioned by the Public Accounts Committee of the National Stockholding: The May–Jun 2011 shortage Assembly in June 2010. prompted Pakistan Economy Watch to ask Information: Oil companies are required to notify their selling the Supreme Court to intervene, and prices to Oil and Gas Regulatory Authority (OGRA), and the prices prompted government to direct all oil are posted on OGRA’s Web site by company and location. In marketing companies to maintain stocks of addition, OGRA continues to compute and notify ex-refinery prices up to 20 days of consumption and give of diesel, kerosene, and gasoline (containing 10% ethanol) every them 6 months to comply or risk license month. Maximum prices of other fuels computed by Pakistan State revocation or heavy penalties. While PSO Oil (PSO) are also posted for information. OGRA also posts the had been required to maintain 20 days of findings of inspections to check compliance and commercial petroleum product stocks, smaller malpractice. companies had to maintain only 7–14 days of stocks. At the end of Jun 2011, OGRA suspended the licenses of six companies for failing to maintain gasoline stocks equivalent to 14 days of typical consumption. Impact of power and natural gas: The inability of power utilities to pay for fuel oil has led to PSO’s cash flow problems and eventually fuel shortages. PSO’s receivables in May 2010 stood at PRs 114 billion ($1.35 billion), and by Jun 2011 PRs 131 billion ($1.5 billion). Natural gas shortages have increased demand for LPG, pushing up LPG prices. Falling hydropower 63 Country E R Pricing policy and strategy Fuel supply conditions generation and gas supply to CNG stations and power plants increased demand for gasoline and fuel oil at the end of 2011. Commercial malpractice: LPG was being sold far above the maximum prices set by OGRA in Jan 2009. All Pakistan LPG Distributors Association claimed in Mar 2012 that the ‘Gas Mafia’ had made estimated billions of rupees during the previous six years by creating artificial shortages of LPG, especially in winter, and selling the domestic product as imported gas. OGRA said in Dec 2011 that smuggling of low-quality LPG and LPG cylinders from Iran was a serious concern, which also posed a threat to public safety. Panama Pricing policy: Government sets maximum selling prices for Supply: PetroCarib member. gasoline and diesel every 14 days. The price of LPG sold in 25- pound (11.4-kg) cylinders has been subsidized and frozen since 1992. Information: Authority for Consumer Protection and Competition, proclaiming “an informed consumer has power,� collects and posts on its Web site gasoline and diesel prices at filling stations every four weeks, highlighting those offering lowest prices. Peru Pricing policy: A 2004 law deregulated prices, but government in Supply: Peru has one complex refinery √ √ May 2004 set up a Petroleum Product Stabilization Fund for an with capacity of about 100,000 bpd. initial period of 120 days when benchmark gasoline and diesel Stockholding: A minimum of 15 days or 5 prices soared by about 35% and 50%, respectively, from their days of storage is required by regulation, December 2003 levels. In the face of volatile and rising world oil depending on the nature of the facility. prices, government has not been able to retire the fund to this day. Budgetary transfers to the fund between its inception and the end of 2011 totaled US$2.5 billion. The fund covers gasoline, diesel, LPG, and industrial oil for power generation. Government publishes reference fuel prices every week and adjusts them within a price band. If the import- or export-parity price (depending on the trade status of the fuel) at the refinery gate or some other equivalent point in the supply chain lies within a price band, there is no government intervention. If the import- or export-parity price lies outside the band, the difference is transferred to or withdrawn from the fund. The fund’s debt in 2008 reached 3,000 million S/ (US$1 billion), which was retired in 2009. After a large budgetary transfer to the fund, an emergency decree was issued in April 2010, requiring the regulatory agency to adjust price bands every two months. The decree stated that the band for price variation was to be 5% except LPG, for which the band was to be 1.5%. Consequences of price smoothing: Budgetary transfers to the fund since inception totaled US$2.5 billion by end-2011: Year 2005 2006 2007 2008 2009 2010 2011 US$ million 55 1 61 735 365 423 900 Source: Government. Compensation: The Peruvian tax agency in August 2010 approved reductions of up to 30% in special selective consumption taxes on diesel for passenger transport for three years. Only transportation companies that operate with all documentation and up-to-date permits were eligible, a move that would also help companies facing unfair competition from illegal operators. Information: The Website of Osinergmin (Organismo Supervisor 64 Country E R Pricing policy and strategy Fuel supply conditions de la Inversión en Energía y Mineria, Supervisory Agency for Investment in Energy and Mining) posts detailed retail prices by location and company and the date of the last price change, but not historical price data. Philip- Pricing policy: The downstream petroleum sector was deregulated Supply: With closure of two refineries, √ pines in 1998. The import duties on crude oil and petroleum products were refining capacity has gone down, and in reduced from 3% to 0% by an executive order in Jun 2010. In Feb addition the utilization rate is low at less 2009, the Department of Energy asked oil companies to explain in than 65%. Product imports are growing, writing within 48 hours the justification for price increases, and now accounting for half of consumption. added that it was checking the dates of the acquisition of the supply, Shortages: LPG shortages were the volume, the value, and the shipment date. On Oct 23, 2009, experienced in Jan–Feb 2009, and again in government imposed price ceilings in response to devastating Sep 2009 when announcements by some typhoons, forcing oil companies to lower prices back to the Oct 15 LPG suppliers of impending price increases level. This led to early closure of some filling stations. The ceilings led to stockpiling and a temporary shortage. were lifted on Nov 16, on condition that the oil companies agree to Damage to a vital bridge by a typhoon in implement discounts and stagger future price increases. Under the Dec 2009 caused LPG shortages in Manila label “jump-starting� strategic reserves, the president ordered and other provinces. Manila experienced Philippine National Oil Company-Exploration Corporation, which is fuel shortage in Nov 2010 after government 99.8% owned by government, to sell diesel at ₱2–3 (US$0.05– shut down a leaking pipeline. 0.07)/liter below the market level starting in Jul 2011. Smuggling: In 2009, citing a study, Petron Price negotiation: Government in 2003 negotiated voluntary diesel Corporation said that fuel smugglers were price discounts with oil companies for transport operators, and there controlling one-third of the petroleum were 803 filling stations offering discounts as of Dec 2012. The size market, resulting in an annual government of the discount has varied over the years. revenue loss of ₱30–35 billion (US$630– Compensation: In April 2011, an executive order established a 730 million). Government had earlier Public Transport Assistance Program and allocated ₱450 million charged a fishing company with illegally (US$10 million) for compensation using smart cards to registered importing more than two million liters of jeepney and three-wheel drivers. At ₱1,050 (US$24) per jeepney, diesel. only 95,000 out of 150,000 cards printed for jeepneys were claimed, enabling the government to offer an additional ₱1,200 (US$28) per vehicle in 2012. Government abandoned a plan for a fuel subsidy scheme for agriculture and fisheries in May 2011, citing difficulties with beneficiary identification. Hedging: Philippine Airlines reported fuel-price hedging losses for the financial year ending in March 2009. Information: The Department of Energy monitors both wholesale and retail prices, and posts detailed current and historical data by location and company as well as the location of each filling station offering a diesel fuel discount on its Web site. Russian Use of export tax and other means to lower prices: Government Supply: The refining industry in Russia has √ √ Federation uses export taxes on petroleum products and other means to struggled to meet tightening fuel influence domestic fuel prices. In Feb 2011, Prime Minister Putin specifications. Its inability to meet Euro-3- ordered Fededral Antimonopoly Service to investigate any cases of compliant fuel quality standards, which unjustified price increases, effectively lowering domestic prices, at came into effect in January 2011, prompted which point gasoline exports (typically making up 10% of total many refineries to curb production or production) began to increase. Faced with gasoline shortages on the increase exports, contributing to acute domestic market, government increased gasoline export tax to gasoline shortages in many regions in early US$408.30 a tonne (US$0.55/liter) in May 2011 and to US$415.80 a 2011. In response, Prime Minister Putin tonne (US$0.56/liter) in Jun 2011, levels high enough to act as a de waived the fuel quality standards on a facto export ban. Prior to this move, Russia’s Federal Antimonopoly temporary basis while simultaneously Service had found companies guilty of over-charging and fined increasing the gasoline export tax sharply. them. Government over the last several years has “recommended� The timeline for fuel quality standards was that oil companies sell diesel at a discount to farmers twice a year. subsequently postponed for the third time For the first agricultural season of 2012, the price discount offered since 2008, delaying the ban on Euro-2- was 30%, up from 10% in 2010 and 2011. In 2012 government compliant gasoline and diesel until the end reached an agreement with oil companies to keep gasoline prices at of 2012, or a full 13 years after Euro 3 the Dec 2011 level until the Mar 2012 presidential elections, and standards came into effect in the European 65 Country E R Pricing policy and strategy Fuel supply conditions then extended the price freeze until May 2012. Union. Shortages: There are often gasoline shortages in summer and diesel shortages in winter. In Apr 2011, gasoline purchases were limited to 20 liters per vehicle in some regions. A sharp increase in gasoline exports in early 2011 was caused by the profitability of exports over domestic sales and the inability of some Russian refineries to meet Euro 3 specifications. The Tuva region introduced ration coupons for gasoline in May 2012, the first time since the Soviet era, when the price of gasoline soared to 50 rubles (US$1.78)/liter. Strategic reserves: In Jul 2011, the energy minister announced a plan to build reserves holding 2 million tonnes of petroleum products, but did not provide a timetable or how much of each product. Establishing crude oil reserves has been discussed for years but without concrete progress. Rwanda Pricing policy: Government sets maximum prices for gasoline and Supply: Rwanda imports through Tanzania diesel in Kigali. Since Jul 2011, government has tried to maintain or Kenya and Uganda, and are adversely constant prices for at least three months at a time. The retail diesel affected by supply disruptions in these and gasoline prices are the same if the international diesel price is transit countries. higher than the international gasoline price, and the retail diesel Shortages: Rwanda in early 2009 suffered price is lower otherwise. At a cost equivalent to 0.4% of GDP, from the fuel shortages affecting east government reduced fuel taxes in Jul 2011 by RF50 (US$0.08)/liter Africa. and in Jan 2012 by another RF50 to bring fuel taxes more in line Stockholding: Rwanda’s Permanent with those in the neighboring countries as well as to curb inflation. Secretary for the Ministry of Trade and Measures to keep prices lower include increasing stockholding and Industry in March 2012 spoke of a plan to bulk procurement. quintuple fuel storage capacity by 2017. Senegal Supply: There is one small refinery, which √ Pricing policy: The National Committee for Hydrocarbons regulates needs tariff protection to be able to compete prices based on an import-parity formula and reviews them every with fuel imports. During much of 2006 four weeks. Fuel price subsidies have incurred budgetary and 2007, the refinery was shut down due expenditures every year except 2010. For decades, government to financial difficulties. heavily subsidized LPG for household use. Today, the unit prices of LPG sold in 2.7-, 6-, and 9-kg cylinders are still slightly lower than Shortages: Serious fuel shortages have those for LPG sold in larger cylinders; the price differences used to occurred, such as LPG shortages in early be much larger in the past. In deregulated markets, unit prices should 2009 and again in 2010. The prolonged decrease with cylinder size on account of large economies of scale in LPG shortages in early 2009 were caused storing, bottling, and transporting LPG. There is no specific tax on by the inability of the refinery to pay for kerosene, leading to a large price difference between kerosene and imports due to mounting subsidies and diesel. Government in Feb 2012 decided to reduce fuel taxes at an government’s falling fell behind in subsidy estimated cost of CFAF35 billion (0.5% of GDP). reimbursement. The shortage doubled the unofficial price of LPG and also pushed up Consequences of subsidies: The subsidies to the refinery and for the price of charcoal, which competes with LPG in 2009 are estimated to have amounted to US$70 million. The LPG in that market. A lack of fuel supply inability to reimburse the refinery resulted in closure of the refinery for power generation has led to recurrent for a while, causing serious fuel shortages. power outages. In October 2010, the energy minister was replaced, in part in response to the public anger over electricity and LPG shortages. Response to commercial malpractice: There is a fuel chemical marker program to check for adulteration of diesel with kerosene and other types of commercial 66 Country E R Pricing policy and strategy Fuel supply conditions malpractice. South Pricing policy: Government regulates gasoline, kerosene, and diesel Supply: South Africa has four large, √ Africa prices, and in addition LPG prices have been regulated since Jul sophisticated crude oil processing 2010. Once a month, government announces basic fuel prices for refineries. In addition, South Africa has gasoline, diesel, and kerosene; maximum LPG retail prices by coal-to-liquid and gas-to-liquid plants, location; maximum national retail price of illuminating kerosene; which produce high-quality diesel with and maximum ex-refinery price of LPG. Basic fuel prices sum CIF, essentially no sulfur and a very high cetane 0.3% ocean losses, cargo dues, coastal storage, and stock financing number. (currently for 25 days). To the basic fuel price are added customs Shortages: South Africa experienced and excise, specific fuel tax, road accident fund levy (gasoline and serious fuel shortages in Dec 2011−Jan diesel), slate levy (gasoline, diesel, and kerosene), petroleum 2012, on account of four refineries shutting pipeline levy (gasoline and diesel), illuminating kerosene dye levy down and a technical problem at the port in (diesel; the price difference between kerosene and diesel is about Durban, affecting fuel supplies in the US$0.30/liter), demand-side management levy (gasoline), inland neighboring countries importing from transport recovery levy (gasoline and diesel), wholesale and retail South Africa. Government’s media release margins, and transport costs. The slate levy settles under- or over- in response to the shortages underscored the recoveries by oil companies arising from differences between the importance of expanding refining capacity basic fuel prices, which remain the same for one month at a time, and improving the import infrastructure. and daily fluctuations in world oil prices. The pricing formula Maritime security: To fight piracy, which allows for a total of 3 days of demurrage. Monthly retail prices for resulted in increased transport costs, fuel diesel in the inland area and monthly average FOB benchmark prices, and insurance bills, South Africa, prices relevant to South Africa since 2007 are shown below. The Mozambique, and Tanzania in early 2012 retail price tracks the world price movement closely, and is also signed a tripartite pact to strengthen markedly higher than the FOB price. maritime security in the Indian Ocean. 12 10 Rands / liter of diesel 8 6 4 Arab Gulf FOB price 2 Inland retail price 0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Sri Lanka Pricing policy: Following a balance-of-payment crisis, government Supply: CPC’s small refinery is in need of √ adopted a pricing formula, which was abandoned in 2004. The expansion and modernization but the formula was revived in Jul 2007 for two months before it was factors plaguing the financial viability of abandoned again. LPG price increases require prior authorization by CPC have deterred investment. Fuel quality Consumer Affairs Authority. Government sets base prices, uniform improvement is one of the casualties, with throughout the country, of gasoline, diesel, and kerosene sold by reduction in diesel sulfur to 0.05% Ceylon Petroleum Corporation (CPC). Lanka Indian Oil Corporation postponed from 2008 to 2012. (IOC) is free to set its prices, but given that CPC controls two-thirds Concessional financing: The Iranian of the market and is the price setter, CPC’s prices effectively limit government granted an interest-free credit Lanka IOC’s price movement. The VAT on gasoline was reduced facility for 210 days to purchase crude in from 15% to 5% in Jan 2008 and then increased to 12% in Jan 2009. 2008, and CPC used up to US$1.2 billion CPC did not adjust prices in 2010, except that of subsidized fuel oil and repaid US$0.845 billion by end-2008. supplied to Ceylon Electricity Board (CEB). CPC froze prices of other fuels between Dec 2009 and April 2011. CPC made only two price adjustments (both increases) in 2011 and two in 2012, the second one of which in Dec involved a price increase only for 90 RON gasoline. Import duties are frequently reduced or waived, 67 Country E R Pricing policy and strategy Fuel supply conditions particularly on gasoline, to compensate oil companies for losses suffered. Social Responsibility Levy and VAT on gasoline imports were removed in 2010. Government increased the prices of gasoline (by 9%), diesel (37%), kerosene (49%), and fuel oil (80%) in Feb 2012. Although the price of fuel oil sold to CEB was raised by 50% in Feb 2012, it remains subsidized. Protests: The large price increases in Feb 2012 sparked protests. Some private bus operators stopped operating, and violence broke out when fishermen protested, killing one. Social protection: The national poverty alleviation program, Samurdhi, provides a monthly allowance for kerosene to households without electricity, raised from SL Rs 100 (US$0.85) to SL Rs 200 (US$1.71) in February 2012. Compensation: Following a 37% price increase, government in Feb 2012 agreed to provide 50 liters of fuel per day to short-distance buses and 80 liters to long-distance buses at the old diesel price. In addition, SL Rs 1,550 (US$13) will be provided to each short- distance private bus owner and SL Rs 2,480 (US$21) to each long- distance private bus owner. Government also granted per-liter subsidies of SL Rs 25 (US$0.21) and SL Rs 12 (US$0.10) to fishing boats fueled by kerosene and diesel, respectively. Hedging: CPC entered into a series of contracts to hedge a portion of its oil imports beginning in 2007, increasing the amount hedged over time to about one-third of oil imports. Lanka IOC also hedged. As long as oil prices were rising, hedging was advantageous, but hedging proved to be extremely costly once oil prices began to crash in the last few months of 2008. In the end, Sri Lanka’s treasury was exposed to about US$464 million in claims from three foreign and two local banks. The perception that the hedging deals were unfairly structured and that the public was being asked to pay for the hedging losses through higher retail prices and not benefiting from falling oil prices rapidly gained wide acceptance, and petitions to that effect were filed. The cabinet appointed a risk management committee to review all hedging contracts and to minimize the losses in Nov 2008. The supreme court ordered a temporary suspension of the CPC chairman and payments to the banks until two petitions, alleging fraud and corruption in the hedging deals, had been dealt with. The supreme court ordered the treasury to handle fuel imports between Dec 2008 and Nov 2009. Lanka IOC also reported losses from hedging. Consequences of subsidies: CPC’s operational losses were SL Rs26 billion (US$0.23 billion) in 2009, SL Rs27 billion (US$0.24 billion) in 2010, and SL Rs94 billion (US$0.85 billion) in 2011, due to provision of heavily subsidized fuel oil to the power sector, price control, and non-payment by several institutions, particularly CEB. SL Rs55 billion (US$480 million) worth of treasury bonds were issued in Jan 2012 to settle outstanding debts owed to CPC by CEB and other state-owned enterprises (source Central Bank of Sri Lanka). Information: Historical prices are posted on CPC’s Web site. The Central Bank of Sri Lanka in its reports regularly provides statistics on subsidies. Syrian Pricing policy: Government controls, subsidizes, and infrequently Supply: Syria has two refineries, both of √ √ Arab Rep. adjusts fuel. Most gasoline is 90 RON, the price of which was raised which are slightly larger than 100,000 bpd to S£44 (US$0.93)/liter in Sep 2010, and raised again in Dec 2011. and the larger of which has a processing In Nov 2010, government said it would allow imports of 95 RON unit for making more diesel. gasoline, to be sold at S£50 (US$1.08)/liter. In 2010, government Shortages: Severe diesel shortages were 68 Country E R Pricing policy and strategy Fuel supply conditions had put forward 2015 as the year in which to move to market reported in the winter of 2011–12. For pricing. The diesel price was raised in Apr 2008 from S£7 heating Syrian families use 200–400 liters (US$0.15) to S£25 (US$0.52), but cut to S£20 (US$0.43) in Apr of diesel a month. Severe LPG shortages 2009 and further to S£15 (US$0.32) in May 2011 before being meant that a 12.5-kg LPG cylinder could raised to S£20 (US0.32) in May 2012 and later to S£25. In Jan 2013, cost as much as S£1,200 (US$22) instead of government raised the gasoline price from S£50 to S£60 (US$0.85) S£250 (US$4.7). The diesel shortages were a liter and diesel from S£25 to S£35 (US$0.49) a liter. blamed for illegal logging in the winter of Consequences of subsidies: Mahrukat, Syria’s sole buyer and 2011–12. distributor, reported losses totaling S£372 billion (US$7.9 billion) in 2008, falling dramatically to S£14 billion (US$0.3 billion) in 2009 due to lower world prices and higher domestic prices. Subsidy in 2010 was reported to have topped US$2.9 billion. In May 2012, when the diesel price was raised to S£20/liter, government said the subsidies had exceeded S£250 billion (US$4 billion). Social protection: Every household received a coupon to buy 1,000 liters of diesel at S£9 (US$0.19)/liter when government nearly tripled the diesel price in Apr 2008. Government in Jan 2011 increased the heating oil allowance for two million public workers and retirees by 72 percent to about 1,500 Syrian pounds (US$32) a month. Tajikistan Pricing policy: Fuel prices are deregulated, but Gazpromneft Supply: Heavily reliant on fuel imports Tajikistan is considered a monopolist and its prices are subject to from Russia. Although there are six major approval by Antimonopoly Agency. oil distributors in Tajikistan, after Impact of Russian export taxes: Tajikistan was exempt from Gazpromneft Tajikistan’s 52%, the second Russian export taxes between 1995 and 2010, but on May 1, 2010, largest market share is Nuri Dilshod’s mere Russia removed tax exemption status. The sharp rise in the export 5.3%. taxes in May 2011 led to a sharp price hike. In Jun 2011, the In-smuggling: There is much smuggling of Russian export tax on gasoline rose as high as US$415.80 per tonne petroleum products from the Kyrgyz (US$0.56/liter). Republic, which is not subject to Russian export taxes. Shortages: Dushanbe experienced fuel shortages in Mar 2010. Severe shortages of 92 and 95 RON gasoline occurred in Sep 2011, when filling stations stopped selling gasoline on Sep 13. Tanzania Pricing policy: The downstream petroleum sector was deregulated Supply: Tanzania stopped government in 2000. In July 2007, Petroleum (Conservation) Act was amended involvement in fuel imports in 2000 and to make Energy and Water Utilities Regulatory Authority shut down its sole refinery in the early (EWURA) the economic regulator of the sector. There is a 2000s. An order issued in Oct 2007 requires regulatory levy on petroleum products to finance EWURA. Energy all product importation to be carried out and Water Regulatory Authority (Petroleum Products Price Setting) using a bulk importation system, and Rules, published in Jan 2009, requires indicative and maximum government issued Petroleum (Bulk prices to be issued; rules and pricing formulae were amended in Jul Procurement) Regulations in Jun 2011. 2011. Prices were issued twice a month but switched to once a Aside from exploiting economies of scale, month in 2012. Currently price ceilings on gasoline, diesel, and bulk importation was also considered to kerosene are set for wholesale (one uniform price for each fuel) and help reduce tax evasion by collecting oil retail (differing by region). Government removed VAT on importation data. By Mar 2012, there were petroleum products in the 2006/07 budget. Excise duties for diesel complaints about lack of transparency by and kerosene were adjusted in Jul 2011 to narrow and even Petroleum Importation Coordinator, which eliminate the price difference between the two fuels, which awarded the contract to the same company previously favored kerosene by a wide margin and led to large-scale three times in succession and which was adulteration of diesel with kerosene. In mid-Oct 2011, government accused of rejecting too many bids from reported that kerosene imports had fallen by two-thirds and diesel established international oil companies on imports rose by 50% as a result. Oil marketing companies minor technicalities. In Apr 2012, oil complained in Aug 2011 that the new ceilings on Aug 3 forced them companies issued a letter complaining to operate at a loss, said they would operate at a loss for only 24 about the non-compliance of the imported hours, and stopped selling for a week. After threatening to revoke fuel with fuel quality, damaging vehicles. 69 Country E R Pricing policy and strategy Fuel supply conditions licenses, government raised prices 12 days later, but not before In Jun 2012, a government laboratory suspending BP Tanzania’s wholesale license for three months. In confirmed that gasoline samples from 10 Feb 2012, Director of the Environment Division in the Prime out of 11 ships did not meet fuel specs. In Minister’s Office said government was considering subsidizing LPG Aug 2012, Minister of Energy and Minerals to stem deforestation. requested EWURA, Petroleum Importation Information: EWURA posts price ceilings by fuel type and location Coordinator, and oil marketing companies on its Web site in English and Kiswahili. All filling stations are to submit detailed reports on the required to post petroleum product prices on boards that are clearly implementation of the procurement system. visible and show prices charged, discounts offered, and any trade Shortages: Power shortages due to drought incentives or promotions on offer. in 2011 forced mining companies and other industries to resort to diesel power generation. There were localized fuel shortages in Jan 2012, with soaring black market prices. Response to commercial malpractice: Between June and Dec 2009, 57 filling stations out of 164 sampled were found to be selling adulterated fuel. This 35% was much lower than 80% when EWURA started inspection in 2007. Government has resumed chemical marking of fuels, and in Apr 2012 launched an electronic cargo tracking system. Strategic stocks: Petroleum Act of 2008 requires Tanzania Petroleum Development Corporation (TPDC) to maintain strategic stocks at all times. Maritime security: To fight piracy, which resulted in increased transport costs, fuel prices, and insurance bills, Tanzania, Mozambique, and South Africa in early 2012 signed a tripartite pact to strengthen maritime security in the Indian Ocean. Thailand Pricing policy: Thailand established an oil fund after the oil shock Supply: For diversification of supply, Thai √ of 1973. It has been used both to smooth price swings on the world Oil started shifting sources of oil imports to market and to cross-subsidize socially sensitive fuels. LPG was Russia and Australia in 2010, with the new cross-subsidized until Nov 2007, and for two months in 2009. sources accounting for 10% of total Gasoline and diesel were subsidized for many months in 2004. imports. The share of new sources is Diesel was subsidized in 11 out of 12 months in 2004, and diesel, expected to rise to 40% by 2013. but not gasoline, continued to be subsidized by the fund in 2005 Shortages: Thailand experienced CNG until Aug. Diesel was again subsidized in 2008, in Jun 2009, in the shortages in 2011 due to soaring CNG first four months of 2011 leading up to a closely contested national consumption. election in July 2011, and again in Aug and Sep 2012. In addition, In-smuggling and response: Public Sector the oil fund levy was eliminated for both gasoline and diesel in the Anti-Corruption Commission reported in last four months of 2011. By Apr 2011, the oil fund reserves had Mar 2011 that smuggling was rampant, been depleted. Aside from periodic subsidization of gasoline and involving politicians, and large fishing diesel, the oil fund has been used mainly to subsidize bioethanol and vessels were smuggling fuel from Malaysia. biodiesel in recent years. The Oil Fund had a deficit of 22 billion The Excise Department in Sept 2010 baht (US$0.7 billion) in Jun 2012. In 2011, the issue at hand was reported that smuggling was costing 77 how long government could prevent the diesel price from rising billion baht (US$2.4 billion) annually. To above 30 baht (US$1)/liter. Monthly average prices of diesel in stem fuel smuggling into the country, PTT Bangkok and monthly average benchmark FOB prices relevant to launched the Green Fuel project in 2002 to Thailand since 2007 are shown below. The plot illustrates provide tax-free diesel, dyed green, to government’s attempts to keep the retail price at or below 30 fishing boats. The Excise Department in baht/liter. 2010 stated that boats using green fuel were required to be fitted with a tracking device using a global-positioning system to 70 Country E R Pricing policy and strategy Fuel supply conditions 45 monitor their whereabouts. 40 Commercial malpractice: Promotion of biodiesel blend B5 by pricing it less than 35 B2 and other blends with lower biodiesel earlier led to B5 being sold as B2, Baht / liter of diesel 30 prompting government to change the color 25 dyes. Widening price differences for LPG between household and other users in 2012 20 led to a large, unprecedented increase in 15 consumption of LPG for household use. There have been reports of industrial users 10 Singapore spot price switching to 48-kg cylinders, the largest 5 cylinder size in which subsidized LPG for Retail in Bangkok residential users is sold. 0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Response to commercial malpractice: Tax reductions: In Apr 2011, the cabinet approved a cut in the Mobile laboratories were set up to test fuel excise tax for diesel from 5.31 baht (US$0.18)/liter to 0.005 baht quality in 2011. The extent of adulteration (US$0.0002) effective from Apr 21 until Sep 30 to keep diesel price of oil reportedly fell from 3% in 2009 to at or below 30 baht (slightly less than US$1)/liter, a move widely 1% after different types of fuel were criticized for being political even by the Federation of Thai colored for identification. Industries. Although launched initially as a temporary measure, this Strategic reserves and stockholding: excise tax reduction has remained in effect to this day. In Jul 2011, Refiners are required to stock crude oil at the Excise Department said the decision had led to higher diesel 5% of refining capacity, enough for 18 days consumption and government had lost 9 billion baht (US$300 of consumption, and stock petroleum million) a month. Government in Aug 2011 suspended contributions products for 19 days of consumption. In of 91 and 95 RON gasoline and diesel to the Oil Fund. Officials Sep 2011, the energy minister said were sent to 18,000 filling stations nationwide to check the amount government was planning to set up strategic of stocks before the new prices became effective; government had oil reserves. set aside about 3 billion baht (US$100 million) to compensate retailers for the inventory. In addition, biofuels enjoy large tax reductions. The total reduction in taxes and charges on E10 for gasoline with 91 RON was US$0.63 per liter of ethanol blended in Feb 2007. By mid-2008, the overall reduction rose to US$2 per liter of ethanol blended, and remained above US$2 in 2012, or triple the FOB price of the same grade of gasoline in Singapore. LPG pricing: The primary source of the subsidy for LPG is not the Oil Fund but the subsidy applied at the refinery gate: the ex-refinery price has been frozen at US$333 a tonne for more than two decades under a program intended originally to help relieve the burden of households and food vendors. The benchmark FOB price for LPG has been consistently above US$333 since Aug 2004, rising to an average of US$850 a tonne in 2011 and US$920 in 2012. Government’s plan to float the price of LPG for industries in 2008 faced strong opposition and was delayed until Jul 2011, when government began to raise the price by 3 baht/kg every three months until it reached 30.13 baht/kg; price increases above 30.13 baht/kg would require the approval of the National Energy Policy Council, chaired by the prime minister. Many companies switched to 48-kg cylinders, normally reserved for household use. Government began to raise the price of automotive LPG in 2012. The LPG subsidy is borne by government and the CNG subsidy by PTT (formerly known as Petroleum Authority of Thailand), and hence government has used the Oil Fund to finance conversion of taxis from LPG to CNG. PTT is eventually reimbursed for LPG subsidy, but with a long delay. In Sep 2012 in Bangkok, LPG was sold at 18.13 baht (US$0.58)/kg to households, 30.13 baht (US$0.97)/kg to industrial consumers, and 21.38 baht (US$0.69)/kg as an automotive fuel, and 71 Country E R Pricing policy and strategy Fuel supply conditions these prices were maintained through early 2013. The prices of LPG for residential and industrial consumers in Bangkok, together with recent national monthly consumption, are shown below. The plot shows stagnating consumption of LPG by industrial users and sharply rising consumption of LPG by households, supporting reports that some industrial users may have switched to residential LPG for cost savings. 60 300 Kt/month Arab Gulf contract price Residential price 50 Industrial price 250 Residential consumption Industrial consumption 40 200 Baht / kg of LPG 30 150 20 100 10 50 0 0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Kt = kilotonnes. In Nov 2012, government announced a plan to raise LPG prices for all consumers over time to 36 baht (US$1.17)/kg, based on an assumed benchmark price of US$0.90/kg in 2013–2014. The retail price would be raised by 0.5 baht (US$0.02)/kg every month for residential and automotive consumers and by 1 baht (US$0.03)/kg a month for industrial users until 36 baht is reached. In Jan, government announced that the start of the monthly price increases would be delayed from Jan to Apr, on the grounds that a survey would need to be conducted first to identify the recipients of government assistance after the price increase. Consequences of subsidies: The Oil Fund received authorization to borrow 10 billion baht (US$0.32 billion) in Oct 2011, and another 20 billion baht (US$0.65 billion) in Mar 2012. In Jan 2013, the oil fund was reported to have a deficit of 16.4 billion baht (US$550 million). Social protection: Government has repeatedly extended a utility subsidy program for low-income households, first introduced in 2008 as world oil prices soared: free electricity to households using up to 90 KWh a month, reduced to 50 kWh in Nov 2011, and free rides on non-air-conditioned public buses and third-class trains. Information: Energy Policy and Planning Office (EPPO) of Ministry of Energy stopped posting monthly information on the balance of the Oil Fund on its Web site in 2011 in the months leading up to a closely contested general election in July, and has not resumed since. EPPO’s Web site otherwise has detailed information on prices, but subsidies at the ex-refinery level are opaque and not indicated. Togo Pricing policy: A 2002 decree established an automatic pricing Shortages: Fuel shortages pushed gasoline mechanism, requiring adjustments when benchmark prices varied by prices significantly in Jan 2012. ±5%. In the face of soaring world oil prices in 2007–08, government Government acknowledges that there is did not adjust prices in line with world prices, and a government little storage capacity and that it does not 72 Country E R Pricing policy and strategy Fuel supply conditions audit found that the net shortfalls borne by oil companies had grown have the financial means to expand it. to 1.5% of GDP. When world prices fell in 2008 and 2009, In-smuggling and response: Smuggling of government maintained price levels in the hope of making up for the fuel from Nigeria and Ghana is a problem, accumulated shortfall. The principle of automatic price adjustments and is one of the reasons government was was reaffirmed in a decree issued in Nov 2010, but government did not able to make up for the losses suffered not start adjusting retail prices until Jun 2011 and fuel subsidies by oil companies by keeping prices high in soared between Jan and May 2011. Taxes on petroleum products 2009. A fuel marker system was introduced were waived in mid-2011. Prices have been frozen since, except for in Aug 2010. Government launched LPG. Operation Funnel II to combat fuel smuggling in Sep 2010. Tunisia √ Pricing policy: Government controls, subsidizes, and infrequently Supply: There is one small refinery, which adjusts fuel prices. The prices of gasoline, diesel, and fuel oil were acquires domestic crude oil at a heavily frozen between Dec 2010 and Sep 2012. The kerosene price has not discounted price. been adjusted since Dec 2010. The price of LPG for household use In-smuggling: Smuggling of cheaper fuels was lowered in Jan 2011 and has not been adjusted since. from neighboring countries increased sharply in 2012. The interim government in early March 2012 pledged to end the sale of smuggled fuel from neighboring countries after complaints from gasoline station owners troubled by a sharp drop in business. Turkey √ Pricing policy: Fuel prices have been deregulated since 1989 and In-smuggling: Smuggling has long been a tax rates are high. At the end of 2008, Turkey equalized taxes on all problem, particularly across Turkey’s petroleum products, but reversed this decision in mid-2009. In 2011, borders with Iraq and Iran. Turkey’s taxes constituted 40% of the retail price of diesel, 51% of gasoline, petroleum industry association estimates 39% of automotive LPG, 39% of light fuel oil for household use, that about 2 million tonnes of illegal fuel and 26% of heavy fuel oil. enters the market annually. Commercial malpractice and response: Unequal taxation has led to large-scale adulteration of less-taxed petroleum products with higher-taxed products, especially by unlicensed operators. All fuel importers and distributors are required to add a fixed proportion of a national marker to all gasoline and diesel in an effort to prevent adulteration and the sale of smuggled fuel. Uganda Pricing policy: Fuel prices are deregulated. Supply: Uganda was required to join the Information: Uganda Bureau of Statistics posts detailed data on Open Tender System in Kenya and did so price surveys every month, although no information is available by in Oct 2010. Transit through Kenya has company or filling station. repeatedly led to supply problems. Shortages: Uganda has experienced numerous serious fuel shortages. The factors in Kenya contributing to fuel shortages in Uganda include disruption of road and railway transit cargo, pipeline leaks, pipeline and refinery outages, delays in unloading of imported fuels, and slow customs clearance. Ministry of Energy and Mineral Development estimated that, in Feb and Mar 2011, the gasoline shortfall was 32% and diesel shortfall 47%. LPG shortages push up charcoal prices, and diesel shortages reduce power generation and result in load shedding, as in Oct 2010. Commercial malpractice and response: Smuggling of fuels not paying taxes is a 73 Country E R Pricing policy and strategy Fuel supply conditions problem. Government introduced a fuel marking program in 1999. Petroleum (Fuel Marking and Quality Control) Regulations 2009 requires marking (by bio-coding) of all petroleum products imported into the country. Stockholding: All oil companies are required to maintain a minimum stock of 10 days. Uganda’s only reserve storage facilities for gasoline and diesel empty since 2006. Uruguay √ Pricing policy: Government sets maximum wholesale prices for Supply: ANCAP runs the country’s gasoline, diesel, and kerosene from time to time. They were changed relatively small sole refinery. only once in 2012. LPG prices are independent of cylinder size. Administración Nacional de Combustibles, Alcoholes y Portland (ANCAP, National Administration for Fuel, Alcohol, and Portland) posts prices dating back to 1974 on its Web site. Venezuela, √ √ Pricing policy: Fuel prices are subsidized and controlled by Response to smuggling: To curb R. B. de government. Earlier attempts to reform price subsidies were not smuggling, Venezuela has been providing successful. Since 1996, government has frozen prices, while the Colombia with subsidized petroleum official exchange rate has depreciated to one-tenth of its value in products. Government in mid-2010 1996 while the rate on the black market is more than four times the expropriated more than 20 filling stations official rate, signaling a very large reduction in fuel prices in real suspected of smuggling fuels to Brazil and terms. Fuel prices along the border are set higher to discourage out- Colombia. In Dec 2010, law makers smuggling. Border filling stations sell fuels at much higher prices tightened penalties to 10–14 years for except those within the quota. smuggling and 5–9 years for police and Protests: The protests against the sweeping economic reforms in other officials reselling confiscated fuels. 1989 turned especially violent. The demonstrations started in part in The energy and oil ministry began tagging response to a substantial increase in public transportation costs vehicles in San Cristóbal municipality in following elimination of fuel price subsidies. The official figure is 2011, carried out by PDVSA. In the first 276 killed in the aftermath of police and army intervention, but phase transport, government, and goods some observers have cited thousands. vehicles are tagged, and in the second phase PetroCaribe: Venezuela has been operating a regional program, private vehicles are also tagged. In Jul PetroCaribe, since 2005. PetroCaribe has 18 members and 12 joint 2011, government uncovered a 1 million- ventures. In Oct 2011, the president of Venezuela’s national oil liter hidden underground storage site run by company, PDVSA, reported that members received 92,000 bpd of a smuggling ring. In 2011, government crude oil and petroleum products. introduced additional measures, requiring drivers in border states to register and present identity documents before purchasing fuel. Vietnam √ Pricing policy: Vietnam has a price stabilization fund and every Supply: Vietnam’s first domestic refinery liter sold contributes to it, with the contribution varying from time to began operating in 2009. time. The money from or to oil companies goes through the fund Smuggling: Fuel smuggling out of the and nothing goes to government: suppliers are instructed to either country is a serious problem. apply an extra levy (and retain it in their accounts) or use part of the imputed value of suppliers’ funds. Until recently, fuel prices were set by government with irregular adjustments. The stabilization fund was D703 billion (US$33 million) in the deficit in early 2011. In Apr 2012, Ministry of Trade and Industry said outflows from the fund exceeded inflows by more than D2.3 trillion (US$110 million), and yet still leaving companies with losses of D5 trillion (US$239 million). Since mid-2012, price adjustments have been more market- based, with wholesalers allowed to adjust prices (although still subject to final government approval). Where price adjustments exceeding 7% are necessary, government is to consider other options to stabilize prices, such as reducing import tariffs and drawing down on the stabilization fund. Government was going to 74 Country E R Pricing policy and strategy Fuel supply conditions start deregulating prices in May 2007 but stopped because of price volatility. Government abolished subsidies to importers, but they were not allowed to raise retail prices without approval from the trade and finance ministries. With increases in retail prices failing to stay in line with rising international prices, importers suffered from negative margins. In Jan and Feb 2013, government did not allow prices to rise and instead asked fuel suppliers to draw from the stabilization fund to reduce losses. Tax reductions: Import tariffs on gasoline and jet fuel were abolished in Feb 2012 and on diesel and kerosene in Mar 2012. Government has historically adjusted import tariffs frequently to smooth retail prices. Hedging: After fuel-hedging losses of some US$30 million in 2008, several airline executives were jailed, allegedly for acting irresponsibility and causing losses, and two foreign executives were barred from leaving the country. Yemen, √ √ Pricing policy: Government controls, subsidizes, and infrequently Supply: There is one large refinery in Rep. adjusts fuel prices. In 2005, government began and then stopped disrepair. reforming fuel price subsidies. In 2011, regular gasoline was Shortages: There have been frequent fuel withdrawn from the market, leaving only super gasoline priced at shortages, caused by hijacking of delivery 175 rial (US$0.82)/liter. In Apr 2012, super gasoline was withdrawn trucks from the refinery in Aden, road from the market and regular gasoline, previously priced at 75 blocks preventing fuel delivery to Sana’a, rial/liter, was re-introduced at 125 rial (US$0.58). smuggling to Somalia and Djibouti, oil Protests: In Jul 2005, at least 39 people were reportedly killed and pipeline attacks (which brought the Aden more than 300 were wounded in riots sparked by fuel price hikes. refinery to a halt for more than two months After the price of diesel doubled in Apr 2012, farmers protested by in 2011), and the inability to obtain credit blocking roads. to buy petroleum products on the open Consequences of subsidies: Fuel subsidies reached 14% of GDP in market. Traders are reluctant to export fuels 2008. to Yemen, fearing payment problems. Year 2006 2007 2008 2009 2010 Severe diesel shortages have damaged US$ billion 1.5 2.0 3.7 1.9 1.5 agriculture, cut back-up power generation % of GDP 8.1 9.3 13.8 7.7 8.2 in hospitals and government buildings, and Source: IMF. caused strikes. Black market prices can increase prices several-fold. In Jan 2011, Minister of Oil and Minerals and the Director General of Yemen Petroleum Company were suspended over fuel shortages. In response to fuel shortages in Apr and May 2011, government ordered fuel rationing. Saudi Arabia, Oman, and the United Arab Emirates have donated fuels. Zambia √ Pricing policy: Government sets wholesale prices according to a Supply: Indeni is small and old, as is the cost-plus formula. Government adopted a uniform pricing pipeline carrying crude to the refinery. The mechanism in Sep 2010, to be implemented in phases, for gasoline, Indeni refinery has been protected by a diesel, and kerosene sold at filling stations. Uniform pricing is 25% import tariff, without which it cannot meant to be self-financing and achieved through the Rural Fuel compete with product imports. Subsidy Fund. Recently prices have been adjusted infrequently, Unscheduled or longer-than-planned raising concerns that they may have fallen below cost-recovery refinery closures for maintenance and levels. Government has frequently reduced or suspended excise repair have frequently led to fuel shortages. taxes and customs duties on petroleum products, especially when the When copper production is low, the country’s sole refinery, Indeni, is shut down, such as in Oct 2009. refinery may be left with surplus fuel, and There is a 25% import tariff. In August 2008, after the refinery shut even had to shut down in Apr 2010. In Oct down twice, oil companies began importing petroleum products 2009, government took over the refinery, directly. In Jan 2009, the import duty was increased from 5% to taking the other 50% share from Total. 25% to protect the refinery and Tazama Pipelines, which was left Even by the standards of landlocked with a large inventory surplus. countries, fuel prices in Zambia have historically been high. Aside from the high 75 Country E R Pricing policy and strategy Fuel supply conditions costs imposed by the refinery, government’s investigation has identified having too many middlemen as another factor, with the potential to reduce the number from 13 to 5. The Zambia Development Agency (ZDA) and an international corporation of Angola in Apr 2012 signed a memorandum of understanding for a multi-billion dollar project to construct a petroleum pipeline to run from Lobito, Angola to Lusaka. Shortages: Fuel shortages are frequent, primarily due to supply disruptions from the refinery. Since Jul 2007, Tazama Pipelines Ltd has been appointed by government to be in charge of fuel imports. The diesel shortage in Sep 2008 was blamed on Tazama’s inability to import diesel. Strategic reserves: Zambia’s Sixth National Development Plan aims to build 30 days of strategic reserves. Smuggling is a problem. Sources: WDI 2012; IEA 2012b; Oil and Gas Journal 2012; Kojima 2012; IMF 2012i; Montaq 2013; Upstream 2013; Platts 2012a; IHS 2010d and 2012c; Argentina 2007; Energypedia; Reuters 2010c; Bangladesh 2012b; Reuters 2011b; Nation (Bangladesh) 2013; IMF 2012c; Petroleum Intelligence Weekly 2011a; Cambio 2012; Petrobras 2013; Economist 2012; Platts 2011a; Kojima 2011; AFP 2008; BMI 2012; IMF 2012k; IHS 2012d; Platts 2009a; China Daily 2012; Xinhua News Agency 2011, 2012a, 2012d, 2012e; Platts 2012f; Wall Street Journal 2012; Market News International 2009; Dow Jones 2010b; South China Morning Post 2011; Platts Oilgram News 2012b; JRJ 2012a, 2012b; Financial Times 2013; Cárdenas Valero 2010; Portafolio 2012; Reuters 2013b, 2013c; GESTOCI undated; PETROCI undated; IMF 2012h; Costa Rica Star 2012; IMF 2011a; Gámez 2012; Mist News 2012, 2013; Egypt Independent 2012a, 2012b; Reuters 2013a, 2013d, 2013e; EIU 2012; AFP 2012a; IHS 2011e; AP 2012; Ahram online 2013; Trend News Agency 2012a; El Mundo 2011; Business News Americas 2012; Walta Information 2012; Ethiopian Reporter 2012; All Africa 2011b; Infos Plus Gabon 2012; Reuters 2012c; Citi FM 2013; All Africa 2011e; Ghanaian Times 2010 and 2012; IMF 2012b; Hindu 2011; Hindustan Times 2011; Automation World 2011; Dow Jones 2011d; IOC 2013; India 2012; International Oil Daily 2012c; Antara News 2012; Jakarta Globe 2012a, 2012b; Pertamina 2012a, 2012b; IHS 2010f; Platts Oilgram News 2010b, 2013; Widjaja 2009; World Bank 2012a; Platts 2012e; Asia Pulse 2011b; Lang and Wooders 2012; Hassanzadeh 2012a, 2012b; Iran Economy Review 2012; Payvand News 2013; Trend News Agency 2012b, 2012d, 2013; Guillaume, Zytek, and Farzin 2011; Platts 2011b; BBC 2012; Jordan News Agency 2012; Mena Report 2011; AFP 2012b, 2012c; UPI 2013; IMF 2012d; Trend News Agency 2012c; RIA Novosti 2013; Interfax 2009b, 2011, 2012; Nefte Compass 2011; Kenya 2008; BMI 2011; PIEA; Business Daily 2011; Vientiane Times 2011; Lao State Fuel Company 2012; Afriquinfos 2012; Indian Ocean Newsletter 2011; IHS 2011b; AFP 2011b; MERA 2010; Borneo Post 2012; AP 2010a; Platts 2009b; IHS 2010c; Malaysia 2011, 2012a, 2012b; International Oil Daily 2012a; ADP 2011; Xinhua News Agency 2012b; UB Post 2012; Dow Jones 2012a; BMI 2013; Morocco 2012; SAPO Moçambique 2009; All Africa 2011c; IMF 11/350; APA 2011a, 2011b; Xinhua News Agency 2012c; IMF 2012g; Himalayan Times 2012a–2012d; Kathmandu Post 2011, 2012; República 2012; IMF 2012d; IHS 2012a; Reuters 2012a; Guardian 2010, 2011-10-26; All Africa 2011d, 2013; Platts 2009d, 2011g, 2012b, 2012g; Nigeria 2011 and 2012; PPPRA 2009; IEA 2012c; Plus News Pakistan 2010; Business Recorder 2009a, 2009b, 2010b, 2011; Financial Daily 2011, 2012; Platts 2011e; Central Reserve Bank of Peru 2012 and earlier notes; Dow Jones 2010a; Asia Pulse 2009, IHS 2009; Platts 2003; Philippine Daily Inquirer 2012; Philippine Star 2009 and 2011; Thai News Service 2009; International Oil Daily 2009, 2012b; SKRIN 2012; Petroleum Intelligence Weekly 2011b; IHS 2011c; Energy Economist 2011b; Financial Times 2011; Platts 2011c, 2012c; AFP 2011a; All Africa 2012b; IMF 2012a; All Africa 2011f; Global Post 2009; IMF 2012j; Reuters 2011c; IHS 2010g; Authentix 2012; South Africa 2011; Lanka Business Online 2012; Sri Lanka News 2012a, 2012b; Kojima 2009; Reuters 2011a; Central Bank of Sri Lanka 2012; Reuters 2012b; IHS 2010b, 2011a; Akhbar 2011; AFP 2012; Trend News Agency 2011; IHS 2011d; 76 Xinhua News Agency 2012c; Daily News (Tanzania) 2011, 2012a, 2012b; Platts 2011f; Tanzania Daily News 2012; East African 2010; IMF 2012f; EPPO 2012a, 2012b; Thai News Service 2010b, 2011b–2011e, 2011g, 2011i, 2011j, 2012a, 2013a–2013c; Platts 2012d, 2012h; Africa Energy Intelligence 2011; Togosite 2011; IMF 2011b; Platts 2011d, 2011h; IACtHR 2002; Business News Americas 2011a; Economist 2013-2-9; AP 2010b; AP 2011-7-30; Info.VN 2012; Platts 2010; Asia Pulse 2011a; TuoiTreNews 2013; IHS 2005; Reuters 2010b; International Oil Daily 2011; Yemen Times 2012; Reuters 2011d; IHS 2010a; All Africa 2012a; IMF staff country reports from 2009 to 2012; Government Web sites and announcements; Web sites of national oil companies and central banks. a √ under P signals the presence of at least one operating refinery. b √ under E signals a net exporter in 2010. 77 Appendix 2: Fuel Diversification and Energy Conservation Measures by Country Table A2.1 indicates whether 20 percent or more of power (P in the second column) in each country was generated from petroleum products in 2010, the last year for which the International Energy Agency (IEA) has data. It also describes each country’s diversification strategy―covering gaseous automotive fuels, biofuel policy, renewable energy (RE) strategy and targets―and energy efficiency (EE) improvement and energy conservation measures. E followed by a number, such as E5 and E10, stands for a blend of gasoline and ethanol where the number is the percentage by volume of ethanol in the blend. Similarly, B followed by a number is a blend of petroleum diesel and biodiesel; B5, for example, is a blend containing 5 percent biodiesel. Table A2.1: Fuel diversification and energy conservation measures Country Pa Diversification Conservation Angola √ No meaningful promotion of RE. No meaningful EE measures. Argentina Liquid biofuels: E5 and B7 mandatory since 2010, but the E5 The Energy Efficiency Commission mandate has not yet been complied with. Biofuel law and regulations promotes EE improvement. offer many incentives to producers. A 2008 law promotes ethanol Efficient lighting: The Energy Efficient from sugarcane. Biodiesel is made from soybeans, ethanol from Lighting Program was carried out between sugarcane. Export taxes discriminate against soybean oil in favor of 2009 and 2011, distributing free CFLs. biodiesel. Biodiesel production in Argentina in 2011 ranked third in Argentina banned imports and sales of the world. Argentina is a leading exporter of biodiesel, having incandescent light bulbs for residential use exported 70% of production in 2011. In 2010, a project for a power starting in 2011. plant burning soy oil was started in the face of natural gas, diesel, and fuel oil shortages. Government wants to eliminate diesel imports and eventually move to B20. In Jan 2012, government eliminated tax exemption for biodiesel. Gaseous automotive fuels: Largest CNG vehicle population in the world until 2007, but growth has stagnated since, due to serious gas shortages and now third largest population. Second largest number of refueling stations. Incentives have been offered to switch away from CNG. Alternative energy targets: A RE law, passed in Jan 2007, sets out a 10-year strategy to boost national RE generation to 8% of total national capacity by 2017, excluding hydropower larger than 30 megawatts (MW). Bangladesh Gaseous automotive fuels: 0.20 million CNG vehicles at the end of The Sixth Five Year Plan for 2011–2015 2011, having grown at an annual rate of 20% since 2007. targets reducing system losses and Alternative energy targets: RE share of power generation 5% by improving energy use efficiency. 2015 and 10% by 2020, with specific targets for biogas, solar, and Government introduced daylight savings biomass in power generation. time in Jun 2009 on a trial basis, but The 2009 RE policy is under review. abandoned it in 2010 after complaints. In Sep 2009, government banned government employees from wearing suits, jackets, and ties during the summer season, which runs from Mar to Nov, and asked officials and ministers to set thermostats no lower than 25°C. The Cabinet in Sep 2009 approved a 14-point plan to save energy, including making use of CFLs and solar panels mandatory, to be phased in over three years, in all government buildings, and promoting solar-powered irrigation pumps. In Mar 2010, government ordered all consumers except hospitals, restaurants, and hotels to turn off air conditioning between 6 and 11 P.M. or else risk disconnection. A 2012 78 Country Pa Diversification Conservation update issued by the finance ministry highlighted several steps to reduce power consumption, including shutting down markets and shopping malls after 8 P.M., shifting irrigation to off peak hours (11 P.M. to 5 A.M.), and setting thermostats in all offices at or above 25°C. Efficient lighting: Government distributed 10.5 million CFLs for free in exchange for incandescent light bulbs (which were destroyed) in 2010–2011. The second phase of the program will give out 17.5 million CFLs. Bolivia Gaseous automotive fuels: 0.16 million CNG vehicles at the end of Efficient lighting: As part of an EE plan, 2011, having grown at an annual rate of 16% since 2007. government distributed 8.5 million CFLs in Ministry of Hydrocarbons and Energy has a vice ministry for 2008–09, and introduced a bill that would electricity and alternative energy, which is in charge of promoting outlaw incandescent light bulbs by Jan 2014. RE. Government predicts 50% of power usage will be saved by the 10 million CFLs that 20,000 soldiers were to distribute to Bolivian homes starting in 2012. Brazil Liquid biofuels: Blending of gasoline with ethanol mandatory since In Oct 2011, Ministry of Mines and Energy 1938. B5 mandatory since Jan 2010. Biodiesel import tariff of 14% approved a national plan for EE. The 2030 in place. Large tax deductions for biodiesel. Ethanol is made from National Energy Plan has a target to reduce sugarcane juice; earlier efforts to scale up production from cassava energy consumption by 10% by 2030. were not successful. Since Apr 2011, government has varied the Daylight savings time from Oct to Feb. blended amount between 18 and 25%, most recently 20% since Oct Efficient lighting: A decree published in 2011; the blended percentage will increase to 25% in May 2013. June 2012 prohibits manufacture of Most of Brazil’s sugarcane mills are equipped to produce both sugar incandescent light bulbs of 150 watts (W) or and ethanol. In Apr 2010, government temporarily removed the 20% higher in 2012, 100 W or higher in 2013, 60 import duty on ethanol, and the waiver has since been extended to W or higher in 2014, and all incandescent Dec 2015. When hydrous ethanol is uncompetitive, demand for bulbs in 2016. gasoline increases. Two consecutive years of poor harvests reduced ethanol production, and Brazil began importing ethanol for the second time in history in 2011 and gasoline in late 2010. Gasoline is imported at world prices and sold below cost. Low ex-refinery gasoline prices threaten ethanol industry and deter investment. Government in Feb 2012 unveiled a strategic plan to increase ethanol production, with 65-billion-reais-worth (US$38 billion) of financing up to 2015. Poor harvests, underinvestment, and ageing crops have been blamed for a fall in production of ethanol. An executive order was signed in Apr 2011, authorizing Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (ANP, National Agency of Petroleum, Natural Gas and Biofuels) to regulate ethanol by changing its status from an agricultural commodity to a strategic fuel. The Brazilian development bank, Banco Nacional de Desenvolvimento Econômico e Social (BNDES), contributed more than US$4 billion in 2010 to foster productivity, most of it used on the renewal of aging sugarcane fields. Ethanol prices increase during inter-harvest periods (Dec–Apr), making high world sugar prices in Mar–Apr the worst-case scenario for ethanol supply. In 2009, total ethanol sales for the first time exceeded gasoline sales. Aside from converting bagasse to electricity which is sold to the grid, natural gas turbines have been adapted to burn ethanol. First such turbine began operating in 2010. ANP began to monitor trade between producers and distributers in Apr 2012. Fuel distributors are required to adopt an annual supply contract to meet purchasing targets, equivalent to 90% of the sales of the gasoline-ethanol blend. If distributors choose 79 Country Pa Diversification Conservation not to set a supply contract, they are required to have stocks on the last day of the month equivalent to the volume of the blend marketed in the subsequent month of the previous year. Gaseous automotive fuels: Fourth largest CNG vehicle population in the world and third largest number of refueling stations, but with stagnant population growth in recent years. Alternative energy targets: Capacity targets for gigawatts (GW) of wind, small hydropower, and biomass installed for 2020. The new Decennial Plan for Energy Expansion to 2020 plans no new fossil- fuel power plants after 2014. Cambodia √ Government, in 2006, approved the Rural Electrification by The power sector, reliant mainly on oil, is Renewable Energy Policy. Cambodia aims to have 15% of rural inefficient. The scope for EE improvement electricity supply from solar and small hydropower by 2015. is considerable. Power Sector Strategy 1999–2016 defines efficient use of energy as one of the objectives. National Strategic Development Plan 2009–2013 gives priority to ensuring efficiency and sustainability of energy production. In 2011, government announced an EE and conservation goal for 2030: a 10% reduction in final energy demand from the business-as-usual scenario by introducing more efficient equipment and EE labeling, and raising awareness about EE. Cameroon √ A RE policy is being prepared. Cameroon’s national energy policy does not focus much on EE improvement. Chile √ Liquid biofuels: No mandates, but E5 and B5 set as targets. Biofuels Chilean EE Agency was established in 2005. not subject to specific taxes. The agency focuses on transport, industry, Alternative energy targets: RE share of power generation (excluding mining, and public, commercial, and large hydropower) 8% by 2020, 10% by 2024. residential buildings and appliances. Daylight savings time implemented. Chile in Sep 2009 launched a new program to take 500 old trucks off the road and replace them with more fuel-efficient newer models to reduce fuel consumption and cut emissions. Government would offer truckers and small cargo transport companies subsidies ranging from 4 million to 12 million Chilean pesos (US$7,273–21,818) per truck, depending on the vehicle’s weight. Chile has a national action plan for EE for 2010–2020. In Jan 2012, Chile launched “Energy Matters,� an EE campaign aimed at decreasing domestic power consumption. Publicity for the campaign will be disseminated using all forms of media: radio, TV, Web, and press. China Liquid biofuels: E10 mandatory in 10 provinces. There is a ban on An Energy Conservation Law was approved new ethanol plants using grains for fear of competition with food in 1998. The law has given rise to more than production. The subsidy for grain-based ethanol has been steadily 160 EE standards. In 2004, government cut, from US$0.19/liter in 2009 to US$0.16 in 2011 and US$0.06 in launched China’s first medium- and long- 2012. Maize accounted for 82% of ethanol production in 2011. No term energy conservation plan. Government mandates or incentives for biodiesel. in its five-year plans has set targets for Gaseous automotive fuels: 1 million CNG vehicles at the end of reducing the energy intensity of GDP: 20% 2011. between 2006 and 2010, and 16% between In Feb 2009, government announced an ambitious program to 2011 and 2015. Government has also set an subsidize alternative-energy vehicles, with subsidies ranging from energy conversation target for each province RMB 50,000 ($7,300) to RMB 600,000 ($87,700), depending on the and city. China has been tightening vehicle 80 Country Pa Diversification Conservation vehicle’s size and cost. fuel economy standards since 2004. Alternative energy targets: RE share of final energy 11.4% by 2015 Efficient lighting: China is implementing a and 15% by 2020. program to phase out incandescent light The Renewable Energy Law was passed in 2005 and supporting bulbs: bulbs of 100 W or higher are banned regulations and guidelines have been issued since. Article 4 requires from Oct 2012, 60 W or higher from Oct that targets for RE be established. China in 2010 had nearly two- 2014, and 15 W or higher from Oct 2016. thirds of the world’s total installed capacity of solar water heaters. Colombia Liquid biofuels: Ethanol mandate started in 2006. Targets of E10 by A decree approved in 2007 enacts provisions 2008 and B10 by 2010 were both missed. E8–E10 (depending on to promote rational and efficient use of region) and B10 mandatory in 2012. Ethanol from sugarcane juice energy and defines some general guidelines. and biodiesel from palm oil. The Indicative Action Plan 2010−2015, Gaseous automotive fuels: 0.35 million CNG vehicles at end- 2011, adopted in 2010, develops a program on having grown at an annual rate of 11% since 2007. rational and efficient use of energy and other Alternative energy targets: RE 5% of total energy mix by 2015 forms of non-conventional energy. (excluding large hydropower), 6.5% of interconnected electricity system by 2020; rural off-grid renewable share of installed capacity 20% by 2015 and 30% by 2030 (currently 8%). Costa Rica Alternative energy targets: RE share of power generation 100% by The National Strategy for De-carbonization 2021. of the Economy aims to reduce dependence Government provides tax and other incentives for solar panels and on fossil fuels and promotes the biomass generation systems. electrification of land transport and EE policies in industry and general consumption. In Jun 2008, amidst soaring oil prices, government restricted vehicle movement in the capital, San José, whereby every car was forbidden from entering the city center on one specific day a week during the rush hours depending on a vehicle’s registration plate. Côte Alternative energy targets: RE share of primary energy 3% by 2013 Ministry of Mines and Energy has a d’Ivoire and 5% by 2015. technical body named the Office for the Promotion of Energy Efficiency. Dominican √ Gaseous automotive fuels: Ninth largest automotive LPG market in Government’s Comprehensive Plan for the Republic the world in 2011. Government also launched a CNG program in Electric Sector for 2006–2012 includes May 2011. demand-side management through EE A 2007 law sets the regulatory framework to promote development improvement. and investment in RE projects, including biofuels. The law gives fiscal and financial incentives to certain renewable energy projects. Regulations were issued in Jun 2008. Egypt, Arab √ Gaseous automotive fuels: 0.16 million CNG vehicles at the end of A member of the Regional Center for Rep. 2011, having grown at an annual rate of 13% since 2007. Renewable Energy and Energy Efficiency Alternative energy targets: RE share of final energy 20% by 2020, (RCREEE). Government has formulated a RE share of power generation 20% by 2020 (12% from wind and 8% National Energy Conservation plan and set from others). up an inter-ministerial energy conservation Government in 1986 established the New and Renewable Energy coordination group. The group focuses on Authority, and in 2008 issued the Renewable Energy Strategy. increasing lighting efficiency, increasing EE in public buildings, and scaling up solar water heaters. An EE program for small and medium enterprises is under implementation. Efficient lighting: The inter-ministerial energy conservation coordination group focuses on increasing lighting efficiency through greater use of CLFs and more efficient street lighting. El Salvador √ The National Energy Policy sets diversification as one of the An EE program was launched in 2006 to 81 Country Pa Diversification Conservation objectives. The diversification strategy for oil promotes gaseous promote energy savings through helping fuels and biofuel for transport. The current administration, however, people identify their own energy has not yet approved the law on ethanol created by the previous consumption. In 2011, government launched administration. “El Salvador Saves Energy,� the first cross- A law on RE was passed in Jun 2008. cutting initiative coordinated by the National Energy Council, in which public institutions, private companies, universities, and civil society representatives signed a memorandum of understanding to join efforts to press for electricity conservation and efficiency improvement, based on the National Energy Policy. Ethiopia Biofuel: Blending ethanol from sugarcane in gasoline since 2008. Efficient lighting: Ethiopia distributed 5 Switched from E5 to E10 in Mar 2011 to lower the price of gasoline. million CFLs for free in 2010 in exchange The price in Addis Ababa fell by 0.45 birr (US$0.027)/liter at the for incandescent light bulbs. In 2012, it time. The economics of this move are not clear, however, because began distributing another 5 million CFLs at sugarcane cultivation is water-intensive but farmers do not pay for subsidized prices. Government has drafted a irrigation water, and government has been subsidizing sugar to keep law banning the use of incandescent light its price low to domestic consumers. bulbs. Alternative energy targets: There are specific targets for MW of wind, hydro, geothermal, and bagasse. Gabon √ Alternative energy targets: RE share of final energy 80% by 2020, Little information on EE available. RE share of power generation 70% by 2020. Ghana √ Alternative energy targets: RE share of power generation 10% by Parliament approved regulations for EE and 2020. labeling standards for lighting and air Renewable Energy Act of 2011 sets a framework for feed-in tariffs conditioning in 2006. and requires power distribution utilities and bulk consumers to Efficient lighting: Government has purchase a certain percentage of RE. launched a program to replace 6 million incandescent light bulbs with CFLs free of charge. Guatemala √ Liquid biofuels: Law on ethanol, making E5 mandatory and dating EE programs in Guatemala are modest but back to 1985, has failed in implementation for lack of sufficient ambitious targets for EE have been incentives. proposed. Alternative energy targets: The 2012–2026 Generation System Expansion Plan, approved in Jan 2012, targets 78% of power from RE by 2026. The 2003 Law of Incentives for the Development of Projects in Renewable Energy has never been implemented. Guinea- √ Other than solid biomass, the country is completely dependent on oil. Government plans to promote EE in Bissau Alternative energy targets: Solar photovoltaic (PV) 2% of primary buildings, residential, and industrial sectors. energy by 2015. There are no regulations or incentives in support of RE. Honduras √ Liquid biofuels: Biofuel producers are given various tax incentives The program, Autonomous Generation and for 12 years. Making E5 mandatory has been proposed but no Rational Use of Electricity, promotes EE. commercial production or consumption of any biofuel is taking Efficient lighting: Government has place. distributed millions of CFLs. A law promoting RE was passed in 2007. India Liquid biofuels: Government unable to implement the E5 mandate, Ministry of Petroleum and Natural Gas first introduced in Nov 2006. Ethanol is produced from molasses; the established the Petroleum Conservation use of sugarcane is prohibited for fear of competition for land and Research Association (PCRA) in the 1970s. water. Imported ethanol does not qualify under the mandate. PCRA carries out energy audits and Biodiesel not mandated. There was a national target of B20 by 2012, conservation awareness campaigns. The but biodiesel production is negligible. Aside from 16% excise tax, no Energy Conservation Act of 2001 other central taxes are imposed on ethanol or biodiesel. Central and established the Bureau of Energy Efficiency some state governments offer fiscal incentives for planting Jatropha (BEE) under Ministry of Power. BEE has curcas and other non-edible oilseeds for biodiesel. Subsidized loans been actively promoting energy 82 Country Pa Diversification Conservation to sugar mills are offered for ethanol, up to 40% of the plant cost. conservation through energy audits and Gaseous automotive fuels: Fifth largest CNG vehicle population in efficiency labeling of appliances and the world at 1.1 million at the end of 2011, having grown at an equipment. In Oct 2011, BEE released a annual rate of 20% over the past 5 years. consultation paper entitled “Passenger Car Alternative energy targets: RE share of power generation 10% by Fuel Economy Standards and Labelling 2012, specific capacity installation targets for wind and solar. Framework.� The comments received raised India has a national solar mission, issued in 2009, targeting 22 GW concerns about the lack of minimum of solar power by 2022. standards and the standards being less stringent than what the automotive industry would have achieved in the absence of standards. Indonesia √ Liquid biofuels: A 2008 biofuel decree includes a framework for In 2008, government issued a decree mandatory biofuel consumption to 2025, and biofuel subsidies were ordering industries to move some of their announced in 2009. Ethanol is made from molasses, but ethanol working days to the weekend to avoid production was suspended in 2010 despite a subsidy of Rp 2,000 blackouts (diesel used in power generation). (US$0.20)/liter because of high feedstock prices. Biodiesel is made A Nov 2009 regulation includes mainly from palm oil. In 2011, 90% of biodiesel produced was implementation of mandatory EE standards exported. Mining companies are required to have 2% biofuel in their and labeling. In Aug 2010, government total fuel consumption. Pertamina increased the content of subsidized established a new director general at biodiesel from B5 to B7.5 in Feb 2012. Starting May 2012, all filling Ministry of Energy and Mineral Resources stations have been required to sell non-subsidized biofuels. In 2013, to be in charge of RE and energy government will provide subsidies of Rp 3,000 (US$0.31) per liter conservation, and the directorate established for biodiesel and Rp 3,500 (US$0.37) per liter for ethanol. an Energy Efficiency and Conservation Gaseous automotive fuels: 5,500 CNG vehicles at the end of 2011. Clearing House. Following a similar Government is trying to diversify to LPG and CNG to reduce campaign in 2008, the president launched an consumption of the heavily subsidized 88 RON gasoline. However, energy and fuel efficiency improvement against the low gasoline price, automotive fuel diversification is campaign in Aug 2011. President announced facing challenges. 5 policies to reduce subsidized fuel Alternative energy targets for 2025: RE share of primary energy consumption and power use in May 2012: 25%, RE share of power generation 15%, biofuel 10.2% share in (1) electronic monitoring of subsidized fuel primary energy, and specific targets for wind, solar, hydropower, and purchase; (2) a ban on purchase of geothermal. subsidized fuel by government-owned vehicles; (3) a ban on purchase of subsidized fuel by vehicles belonging to mining companies and plantations; (4) liquid fuel to gas conversion; and (5) a campaign to minimize fuel consumption through reduced use of electricity in state enterprise and government offices and on the streets. Iran, √ Gaseous automotive fuels: Conversion from gasoline to CNG Government established Energy Efficiency Islamic aggressively promoted to reduce gasoline consumption and imports. Organization of Iran in 1996. Rep. Largest CNG vehicle population in the world at 2.9 million end- Efficient lighting: Government has banned 2011, having grown at 55% a year since 2007. The number of incandescent light bulbs with wattage refueling stations ranks fourth worldwide. exceeding 40 W beginning in 2014. Government established Renewable Energy Organization of Iran in 2000, but the potential for RE has not been exploited much to date. Iraq √ Not much RE promotion. Not much EE promotion. Jamaica √ Liquid biofuels: Only E10 sold from Nov 2009. Ethanol is imported. National Energy Policy Framework 2009– Alternative energy targets: RE share of primary energy 15% by 2020 2030 identifies EE and energy conservation and 20% by 2030, RE share of power generation 15% by 2020. as one of the seven priority areas, and Jamaica’s National Energy Policy Framework 2009–2030 identifies targets reducing the energy intensity of the RE as one of the seven priority areas. A policy working group in Aug economy by more than 60% between 2008 2010 issued a draft National Renewable Energy Policy 2009–2030. and 2030. Ministry of Energy and Mining in Oct 2010 issued National Energy Conservation and Efficiency Policy 2010– 2030, setting specific strategies for industry, transport, buildings, and electricity 83 Country Pa Diversification Conservation generation. Jordan Alternative energy targets: RE share of primary energy 7% by 2015, EE improvement is supported by the 2010 10% by 2025, specific 2020 targets for MW of wind and solar RE and EE law. Daylight savings time in thermal, solar water heaters in 30% of households by 2020 (from summer. Switching power generation from 13% in 2010). gas to diesel in Feb–Mar 2011 forced A RE and EE law was passed in Jan 2010, focusing on the power government to order a 50% reduction in sector. The law stipulates establishment of a RE and EE fund, street lighting and a 50% reduction in financed in part by government’s annual budget. RCREEE member. electricity use by all government bodies. In Jun 2011, Total Jordan launched an eco- service program aimed at helping customers reduce fuel consumption. Provided free at all filling stations across Jordan, Total Jordan checks the tire pressure and re- inflates if necessary, checks the engine oil level, and offers advice on steps to reduce fuel consumption. Kazakhstan Government adopted the Law on the Use of Renewable Energy In Mar 2011, government reported Sources in Jul 2009; the law was last amended in Jul 2011. The law introduction of peak-load tariffs enabled a requires electricity transmission companies to allow RE to be 2.3% reduction in electricity consumption in connected to the grid, and targets 5% of the country’s total energy 2010. The Law on Energy Saving and balance to be renewable by 2024. Energy Efficiency, signed in Jan 2012 with associated amendments, aims at reducing energy consumption by industry by 10% by 2015 and by 25% by 2020. Efficient lighting: The above Jan 2012 law bans the sales and manufacture of 100-W light bulbs starting in July 2012, 75-W bulbs in Jan 2013, and 25-W bulbs in Jan 2014. Kenya √ Liquid biofuels: Ethanol blending in motor gasoline was made The finance ministry in fiscal 2009/10 mandatory in a regulation issued in May 2010, but the percentage to directed all ministers and other staff to a be blended is not specified and the implementation status has not single vehicle with an engine no larger than been reported. 1.8 liters, and to surrender non-compliant Alternative energy targets: Capacity targets set for 2030 for vehicles by Sep 2009. The National Task geothermal, wind, and hydropower. Force on Accelerated Development of Green National Climate change Response Strategy of 2010 promotes Energy was inaugurated in mid-2009. The development of renewable energy. Kenya Association of Manufacturers (KAM) provides training for EE and energy audits through the Centre for Energy Efficiency and Conservation, and offers the annual Energy Management Award to recognize significant, sustainable gains in EE and energy and cost reductions. In Jun 2009, KAM asked its members to reduce peak time consumption to avoid forced rationing of power. Efficient lighting: In Aug 2009, as power rationing started, government said 1.5 million CFLs were being imported for free distribution in exchange for incandescent light bulbs to be surrendered. Energy minister also announced that regulations to mandate CFLs would be drafted. Lao PDR Liquid biofuels: Government aims to meet 10% of transportation The EE and conservation goals released in fuel demand with biofuel by 2025. Government plans to issue a Sep 2011 set a target of a 10% increase in biofuels decree and a biofuel action plan, and starts mandating EE by 2030 but without concrete action blending of ethanol and biodiesel in 2015. plans. Alternative energy targets: RE share of total energy consumption 84 Country Pa Diversification Conservation 30% by 2025. Lao PDR National Strategy on Renewable Energy, launched in Oct 2011, aims to ensure adequate supply of energy; promotes EE improvement, energy conservation, and cultivation of biofuel feedstocks; and outlines steps and targets to 2025. Liberia √ Liquid biofuels: Aspirational goal of meeting 5% of transportation National Energy Policy of 2009 targets a fuel demand with biofuel by 2015. 20% EE improvement by 2015. Alternative energy targets: RE share of power generation 30% and RE share of total energy consumption 10% by 2015. National Energy Policy of 2009 promotes RE, and substitution of petroleum fuels with liquid biofuels in the long term. Madagascar √ Alternative energy targets: RE share of final energy 54% by 2020, Little information on EE improvement RE share of power generation 75% by 2020. plans. Power generation is largely dependent on diesel. Incentives are offered for wind and hydropower. Malawi Liquid biofuels: Mandatory minimum oxygen blending corresponds Government announced in Aug 2010 that it to a minimum of E9.5 for 93 RON gasoline and E7.5 for 95 RON would start distributing 1.2 million CFLs gasoline. Gasoline has been E10 made from molasses since 2006. free of charge. The World Bank’s Energy Prior to 2006, the blended amount was 20%. Sector Support Project for 2011–16 supports Alternative energy targets: RE share of primary energy 7% by 2020, demand-side management and EE hydropower installation capacity target set for 2014. improvement. The Promotion of Alternative Energy Sources Project seeks to promote non-traditional fuels for cooking and heating to reduce environmental degradation, and a National Sustainable and Renewable Energy Program promotes RE technologies. Malaysia Liquid biofuels: National Biofuel Policy issued in 2005. B5 was Malaysia established Ministry of Energy, mandated in 2009, but implementation of the mandate has been slow Green Technology, and Water in early 2009. in the face of high palm oil prices and subsidized diesel prices. B5 is Government launched a green building mostly unavailable on the market. index in May 2009, and is providing, Alternative energy targets: RE share of power generation 10% but between 2009 and end-2014, building without a target date. RE share of electricity (excluding large owners obtaining green building index hydropower) 10% of national supply, 6% of capacity, and 5% of certificates with income tax exemption generation by 2015; 11% of capacity and 9% of generation by 2020; equivalent to the additional capital 14% of capacity and 11% of generation by 2030; and 36% of expenditure in obtaining the certificates. The capacity and 15% of generation by 2050. Green Technology Financing Scheme was Renewable Energy Act passed in Apr 2011. launched in the 2010 budget, providing RM 1.5 billion ($480 million) for supply-side and demand-side management and RE projects. The phaseout of incandescent light bulbs is under implementation and will be completed in 2014. Mexico Liquid biofuels: The Law for the Promotion and Development of A law on sustainable energy, including EE, Bioenergy, passed in Feb 2008, promotes liquid biofuels. Ethanol was signed in Nov 2008 and its and biodiesel, however, are more expensive than gasoline and diesel implementation regulations were adopted in and government keeps postponing commercial introduction of liquid 2009. The law and regulations cover EE biofuels on a large scale. Government is promoting Jatropha curcas labeling requirements and a voluntary and palm plantation. A new ethanol introduction program was product certification program. Government launched in Nov 2011, setting annual targets for ethanol in 2012–16. in Nov 2009 adopted an energy savings Alternative energy targets: RE share of power generation 35% by program for 2009–2012. Government is 2025. carrying out a number of EE programs, Government in Nov 2008 approved Law for Renewable Energy including distribution of more than 200 Development and Financing for Energy Transition. million CFLs and replacement of more than 5.5 million appliances over five years, efficient public lighting, industrial and commercial EE programs, and supply-side EE in the power sector. 85 Country Pa Diversification Conservation Efficient lighting: A schedule is in effect for banning incandescent light bulbs: 100 W starting in Dec 2011, 75 W in Dec 2012, and 40–60 W in Dec 2013. Mongolia Alternative energy targets: RE share of power generation 20–25% A project for EE improvement in buildings by 2020. was launched in 2009. Government approved a national RE program in 2005 for 2005– 2020, and adopted a law on RE E in 2007. The RE law sets feed-in tariff ranges by type of energy. Morocco √ Morocco in 2007 became the first country in the region to pass a RE RCREEE member. The new energy strategy law similar to Germany’s feed-in model. adopted in 2009 has EE improvement as one Alternative energy targets: RE share of power generation 20% by of its pillars. Government in 2009 signed an 2012; various capacity targets for wind, solar, and small hydropower; agreement with the private sector, offering a 0.28 GWth (thermal gigawatts) of solar water heating by 2012, 1.19 20% bonus for each 20% of reduced GWth by 2020; RE share of primary energy demand 10–12% by consumption in electricity. ADEREE is 2020 and 15–20% by 2030. tasked with monitoring and coordinating There is a National Program of Development of Renewable Energy energy audits, and developing standards, and Energy Efficiency. Government established an Agency for the labels, and appropriate incentives for EE Development of Renewable Energy and Energy Efficiency improvement. ANDEREE has launched (ADEREE) in 2011. national programs for EE in buildings and industry. Mozam- Liquid biofuels: E10 and B3 mandatory beginning in 2012. Little information on EE improvement bique Alternative energy targets (no timetable): 2,000 MW each of wind, plans. solar, and hydropower; 82,000 solar PV systems; 1,000 bio- digesters; 3,000 wind pumping stations; 100,000 solar heaters in rural areas; and 5,000 RE-based productive systems. Namibia The Namibia Renewable Energy Program was first launched in 2004, NamPower has a demand-side management and the second phase was started in 2007. The Renewable Energy program, which distributed 900,000 CFLs and Energy Efficiency Institute (REEEI) was launched in 2006 under free of charge in 2007–09 in exchange for the auspices of Ministry of Mines and Energy. The Solar Revolving five incandescent light bulbs per household, Fund, launched in 1996, has financed solar home systems, solar financed out of the company’s profits. water pumping, and solar water heating. REEEI has developed an EE strategic action plan. Nepal Alternative energy targets for 2013: 1 MW of wind, 3 MW of solar, National Electricity Crisis Resolution and 15 MW of micro-hydropower. Action Plan 2008 promotes EE Government in 2009 issued a subsidy policy for renewable (rural) improvement through efficient lighting, energy. The Biogas Support Program is the second largest alternative energy audits, a code of conduct to save rural energy program in Nepal. Government announced a National energy, and raising public awareness for Biofuel Program in fiscal 2008/09, focusing particularly on Jatropha demand-side management. curcas for biodiesel. Nicaragua √ Alternative energy targets: RE share of power generation 38% by The National Energy Commission has a 2011. division dealing with energy efficiency. The general law on environment and natural resources was amended in 2008 to permit RE development in 76 protected areas that previously were off-limits to developers. The Geothermal Law approved in 2002 regulates exploration and production of geothermal energy. Niger √ Alternative energy targets: RE share of primary energy 10% by The National Strategy for Domestic Energy 2020. promotes efficient appliances. The National Strategy for Renewable Energy guides the promotion of RE. Nigeria Alternative energy targets: RE share of power generation (excluding The National Centre for Energy Efficiency large hydropower) 18% by 2025, 20% by 2030. Specific installation and Conservation was established in 2010 at targets by 2015 and 2025 for wind, solar PV, small hydropower, and the University of Lagos. biomass-fired power generation. Government formulated a Renewable Energy Master Plan for 86 Country Pa Diversification Conservation Nigeria in 2006. Pakistan √ Liquid biofuels: E10 marketed since 2010, and priced lower than Introduced daylight savings time in Apr pure gasoline. The biodiesel policy recommends B5 by 2015 and 2009. Pakistan Electric Power Company B10 by 2025. (PEPCO) in May 2009 introduced time-of- Gaseous automotive fuels: At end-2011, second largest CNG vehicle day tariffs with higher tariffs in the evening population in the world at 2.9 million and the largest number of than in the morning to reduce peak demand. refueling stations at 3,285. Following gas shortages, a ban on PEPCO declared 2010 the year of conversion to CNG was imposed in Dec 2011. elimination of power theft, and also started a Alternative energy targets: RE share (excluding large hydropower) public awareness and social outreach of power generation 10% by 2012. program. Government in April 2010 A 2010 act established an Alternative Energy Development Board announced several measures (in effect until under Ministry of Water and Power. Jul 30) to cut power consumption further: closure of commercial centers at 8 P.M.; 5 work days a week; a 50% reduction in lighting in government buildings; allowing air conditioners only to officials at or above grade 20 after 11 A.M.; not providing power for irrigation during peak hours; cutting off power to billboards, neon signs, and commercial decoration lights; and limiting weddings at wedding halls to 3 hours. PEPCO reported that this saved 1,000 MW. Office and bank closure on Sat was expected to reduce consumption of gasoline and diesel also. Efficient lighting: The National CFL Program will provide 30 million CFLs free of charge in exchange for incandescent bulbs with estimated savings of 2 billion kWh. Panama √ Alternative energy targets: 706 MW of hydropower and 120 MW of The National Energy Plan recognizes EE as wind power by 2023. part of energy planning and includes National Energy Plan 2009–2023, issued in 2009, sets targets demand-side management. An executive for additional power generation capacity by 2023, including 473.5 decree in Oct 2009, motivated by a drop in MW of thermal power. hydropower, included reducing government office hours and air conditioning use, and the designation of an energy administrator at government agencies to ensure compliance. Peru Liquid biofuels: E7.8 mandatory since 2010 and B5 since 2011. Government in 2009 approved a plan for Ethanol from sugarcane and biodiesel from palm oil. Peru is a net efficient use of energy for the period 2009– exporter of ethanol, but the bulk of biodiesel consumption is 18, and in 2010 established a General imported: 77% in 2010, 74% in 2011, and more than 90% (forecast) Directorate of EE under Ministry of Energy in 2012. A law on biofuel market promotion was approved in 2003. and Mines. New regulations were issued in Gaseous automotive fuels: Rapid growth of CNG vehicle Mar 2011. population, rising from virtually none in 2005 to 122,000 in 2011, Efficient lighting: A CFL program representing an annual growth rate of 58%. distributed 1.5 million bulbs in 2009 and Alternative energy targets: A 2008 decree promotes RE to reach 5% 2010. in 5 years. Philippines Liquid biofuels: E5 mandatory by Feb 2009 and E10 by Feb 2011; The National Energy Efficiency and B1 by Feb 2007 and B2 by Feb 2009. Conservation Program sets as its goal The Biofuels Law of 2006 sets a timeline for mandatory blending making EE and conservation a way of life. percentages and offers fiscal incentives and financial assistance. Government has issued a series of Compliance with B2 has not been a problem, but domestic administrative orders designed to reduce production capacity is inadequate for compliance with E10 and energy consumption in government, imports are expected to continue to increase until at least 2014. including Administrative Order 126, which Alternative energy targets: RE share of power generation 40% by requires air conditioning to be turned on no 2020, tripling 2010 renewable power capacity by 2030 with various earlier than 9 A.M. and turned off no later 87 Country Pa Diversification Conservation installation targets for wind, solar, hydropower, geothermal, biomass, than 4 P.M., and switched to the fan mode and ocean energy. during lunch hours. Since 2003, the Manila Government approved a Renewable Energy Act in 2008 and issued Electric Company has had an appliance implementing regulations and rules in 2009. calculator on its Web site, showing the cost of operating different appliances, total electricity bill, and tips for EE improvement. In 2011, the Department of Energy urged the public to conserve energy under its banner, “Bright Now!�. Automotive fuel conservation: The Department of Energy has been promoting automotive fuel conservation for more than a decade. There is a vehicle-use reduction program as part of national energy efficiency and conservation efforts. The department’s Web site posts fuel-saving driving habits for awareness-raising. “Bright Now!� in 2011 advertised fuel-saving tips for drivers. A Shell market research survey in the first quarter of 2009 found 90% of those surveyed were willing to change driving habits to save fuel. Three most common fuel-saving driving habits adopted by Philippine drivers were (1) keeping the engine properly tuned, (2) keeping the tires properly inflated, and (3) driving sensibly and within speed limits. Shell’s survey in Mar 2010 found 91% of drivers were willing to change behavior to save automotive fuel, and 64% were proactive in adopting fuel- saving habits. Efficient lighting: Between 2009 and 2011, the Department of Energy distributed 5 million CFLs, and planned to distribute another 3.6 million CFLs in 2012. Legislation to ban incandescent light bulbs has been under consideration for several years. Russian Liquid biofuels: No industrial production of bioethanol or biodiesel, A federal law on EE was issued in Nov Federation and no government-backed biofuel projects in operation. 2009. One objective is to reduce the Gaseous automotive fuels: Third largest automotive LPG market in country’s energy intensity by 40% by 2020. the world in 2011. Declining CNG vehicle population, falling to Efficient lighting: Russia has a timetable for 86,000 in 2011. banning incandescent light bulbs in phases, Alternative energy targets: RE share of power generation 2.5% by starting with high-wattage bulbs, to be 2015, 4.5% by 2020. completed by 2014. Rwanda √ Alternative energy targets: RE share of power generation 90% by Efficient lighting: A project to distribute 2012, 42 MW of small hydropower by 2015. 800,000 compact CFLs is included in the 2011 National Energy Policy and Strategy, limiting the number of subsidized CFLs to five per household. CFL distribution has become a part of the National Energy Access Program, providing 3–4 bulbs to each new customer. Senegal √ Alternative energy targets: RE share of primary energy 15% by The Program to Promote Rural 2025, RE share of power generation 15% by 2020. Electrification and a Sustainable Supply of The parliament passed a RE Law in 2010, which provides support Domestic Fuel for 2003–15 promotes EE schemes including tax breaks. The National Biogas Program, in and offers subsidies of up to 80% for higher- 88 Country Pa Diversification Conservation implementation since 2009, aims to install 8,000 biogas digesters. efficiency equipment, such as efficient light The Program to Promote Rural Electrification and a Sustainable bulbs. Supply of Domestic Fuel 2003–2015 offers subsidies of up to 80% Efficient lighting: A rural lighting for solar street lighting and solar home systems. efficiency project is distributing 1.5 million CFLs during the period 2009–13. South Liquid biofuels: August 2012 regulations made B5 and E2–E10 Government published “Energy Efficiency Africa mandatory, with effectiveness date to be set by the energy minister. Strategy for South Africa� in 2005, setting a The biofuel strategy of Dec 2007 excluded maize and Jatropha long-term target of improving EE by 12% curcas from potential feedstocks out of concerns for food security. by 2015 relative to a baseline scenario. Alternative energy targets: RE share of power generation 4% by There are specific sub-sector targets, such as 2013 and 13% by 2020; 3,100 MW of renewable energy installed reducing final energy demand by 20% in and 10,000 GWh (gigawatt-hours) generated by 2013. In 2009, the public buildings and 15% in the residential energy minister announced a target to install 1 million solar water sector. The Department of Energy has an heaters over the next 5 years. appliance labeling campaign. Government issued a review of the strategy in 2009. In Mar 2011, government launched “49M,� a 5-year electricity-saving initiative where the name of the campaign refers to all 49 million South Africans. Sri Lanka √ Diversifying away from oil for power generation to coal. First coal- Government updated the targets in the 2006 fired power generation plant commissioned in Mar 2011. national energy policy to aim reduction in Alternative energy targets: RE share of power generation 10% by total losses in electricity transmission and 2015 and 20% by 2020, biofuels 20% of supply by 2020. distribution from 14.6% in 2009 to 14.0% The Sustainable Energy Authority, which became operational in Oct by 2012, 13.0% by 2016, and 12.0% by 2007, is tasked with developing and implementing Sri Lanka’s policy 2020, and energy savings of 4.3% in 2012, for RE development, demand-side management, and energy 6.4% in 2016, and 8.7% in 2020 through conservation. energy conservation. Import tax concessions to hybrid vehicles were given in Feb 2011. Government issued many announcements about the need to conserve energy in 2012, including requiring government institutions to limit fuel and power consumption, as a priority and a national responsibility to save foreign exchange. A national power conservation program was inaugurated in Mar 2012 with participation of school children. The Ceylon Electricity Board (CEB) conducts awareness campaigns. Ministry of Power and Energy launched a “Today for Tomorrow� national energy conservation program to conserve power in 2012. As part of the program, CEB announced in Apr that it would provide free electricity for a month to 1,000 consumers―selected through a raffle draw―who reduce consumption on their April, May, or June bills compared to the Mar statement by 20%, and a 50% discount to 5,000 consumers who manage to reduce consumption by 10%. The minister instructed ministry staff to reduce power consumption by 10% and restricted air conditioning to 10 A.M.–3 P.M. CEB launched a campaign, “Switch off at least one bulb during peak hours.� Government urged users to refrain from using irons and other appliances between 6:30 and 9:30 89 Country Pa Diversification Conservation P.M., and turned off street lights. Efficient lighting: A gazette notification issued in Jul 2009 allows only CFL bulbs labeled with the certification label issued by Ministry of Power and Energy to be manufactured, imported, or sold. CFLs have star ratings ranging from 1 to 5. Syrian Arab √ Alternative energy targets: Specific capacity installation targets for RCREEE member. The Energy Rep. 2015, 2020, 2025, and 2030 for wind, solar PV, concentrating solar Conservation Law issued in 2009 requires power, and biomass power. specified entities to establish an energy conservation unit. Tajikistan The Complex Program on Alternative Energy Sources was issued in A 2002 law on energy conservation supports 2007, dividing the period between 2007 and 2009 into three phases establishing a legal framework for and focusing on small rivers, solar, wind, biomass, and geothermal conservation. A presidential order issued in energy. Apr 2009 addresses additional measures for efficient energy use and energy savings. Efficient lighting: Effective October 2009, government banned imports of incandescent light bulbs. Tanzania Gaseous automotive fuels: Government keen on CNG but as of Aug The 2003 national energy policy targets 2011 only one filling station in the whole country. implementing energy audits in industry. The 2003 national energy policy supports research and development as well as creation of an enabling environment for RE development. Thailand Liquid biofuels: B2 mandatory since 2008, and currently B3/B4 Thailand has had energy saving campaigns mandatory, depending on biodiesel availability. Government has thus for more than two decades. Incentives far reversed the previous policy of mandating ethanol in gasoline, started being offered only in 2003. and instead promotes ethanol through a sizable price discount Combined spending by both companies and enabled by tax reductions. Starting in 2013, to further encourage state agencies from 2003 to Jun 2011 is an ethanol use, production of pure 91 RON gasoline was discontinued. estimated 216 billion baht (US$6 billion). The 2021 consumption targets are 9 million liters a day of ethanol Government offers tax deductions on and 6 million liters a day of biodiesel. Ethanol is made from cassava corporate and personal income tax for and sugarcane, biodiesel from palm oil. E10, E20, and E85 are sold. buying products carrying the No. 5 energy- The total reduction in taxes and charges on E10 for gasoline with 91 saving label. Ministry of Energy issued new RON was US$0.63 per liter of ethanol blended (or US$0.06 per liter regulations for designing buildings to of blend) in February 2007, rising to US$2 per liter of ethanol conserve energy in Feb 2009. There is an blended by mid-2008, and remained above US$2 in 2012. Aside Energy Conservation Promotion Fund. The from price subsidies for both ethanol and biodiesel, profit incentives Energy Regulatory Commission has raised are given to filling stations for selling E20 and the excise tax on flex- the concern that free electricity provided for fuel vehicles was reduced in Apr 2010. Government in Feb 2011 said social protection might not help the poor that the daily biodiesel subsidy would rise from 148 million baht while reducing incentives for EE, and (US$4.8 million) to 165 million baht (US$5.4 million). instead recommended a program similar to Gaseous automotive fuels: 301,000 CNG vehicles at end-2011, Australia’s Hardship Utilities Grant Scheme. having grown at an annual rate of 40% since 2007. Between 2004 In 2011, the cabinet rejected proposed and the end of 2011, the combined CNG subsidy was 31 billion baht changes to the automobile excise tax (US$1 billion). Eighth largest automotive LPG market in the world structure that would have taken fuel in 2011. Starting in Jan 2012, automotive LPG price was meant to be efficiency and carbon emission into account. raised by 0.75 baht/kg every month to 27 baht/kg (US$0.86/kg), but The 20-Year EE Development Plan for fell short of the goal and stopped at 21 baht. 2011–30 targets a 25% reduction in energy Alternative energy targets for 2021: RE share of final consumption intensity of the economy between 2005 and 25%; RE share of power generation 10%; substitution of oil with 2030. In Mar 2012, government approved a biofuel 44%; and specific capacity installation and/or energy five-year expenditure plan for the fund for production targets for wind, solar, hydropower, biomass, biogas, and energy-conservation promotion totaling 35 municipal solid waste. billion baht (US$1.1 billion), and authorized a project to save energy in government buildings by setting up an energy service panel, which will provide a one-stop service for inspecting energy usage, setting 90 Country Pa Diversification Conservation conservation measures, and designing systems and helping secure sources of funds as well as assessing the project. Shell’s survey of drivers in Mar 2010 found that 93% of Thai drivers were willing to change behavior to save automotive fuel, and 80% proactively practiced fuel-saving habits. Togo √ No information. No information. Tunisia Alternative energy targets: RE share of power generation 4% by RCREEE member. There is a substantial 2011, 16% by 2016, and 40% by 2030; specific capacity installation body of law governing EE, including targets for wind and solar water heaters by 2011; RE capacity targets provisions for mandatory audits, incentives for 2016 and 2030. for investment in EE improvement, and establishment of an EE fund. National Agency of Energy Conservation established in 1985. It set up an energy-saving program for the period 2008–11. Turkey Alternative energy targets: RE share of primary energy 30% by An EE law came into force in May 2007 and 2023. is expected to achieve 25–30% savings in Turkey in 2010 was second only to China in the installed capacity of total energy consumption through solar water heaters. Turkey’s automotive LPG market in 2011 was administrative structuring, energy audits, second only to that in the Republic of Korea. A law on the use of RE financial instruments and incentives, for power generation was adopted in 2005. awareness-raising, and energy service companies for EE. Uganda √ Alternative energy targets: Specific targets set for 2012 and 2017 for The 2007 RE policy also set EE targets for hydropower, geothermal, solar water heaters, ethanol, biodiesel, and 2012 and 2017, including the number of biogas. The overall goal of the RE policy issued in 2007 is to energy audits and EE equipment installed in increase the use of modern RE from 4% to 61% of total energy industry. The program to promote RE and consumption by 2017. EE supports development of a legal and regulatory framework for EE, EE standards for household appliances (refrigerators, lighting appliances, air conditioners) and electric motors, training programs for energy audits, and awareness-raising about EE. Efficient lighting: Government has distributed 800,000 CFLs to residential consumers, each receiving 3 CLFs free of charge. Uruguay √ Liquid biofuels: B2 mandatory between 2009 and 2011, and B5 in The Energy Strategy Guidelines for 2012. Biodiesel is made from beef tallow. E5 mandatory from 2015. Uruguay, issued in 2006, aimed to raise Energy Action Plan for 2005–30 seeks to reduce the share of fossil public awareness about demand-side fuels, including a 15% reduction in fossil fuel consumption in management and increase the availability transportation. and acquisition of energy efficient goods Alternative energy targets for 2015: RE share of primary energy and services. Government formed a 100%, RE share of power generation (excluding large hydropower) technical group in 2008 to advise the public 15%, 1,000 MW of wind, and 200 MW of biomass. sector on the implementation of energy- A law on solar energy enacted in 2009. saving measures as part of an EE program approved in April 2008, but the group was disbanded in 2010 due to good hydrology. A law on EE was enacted in 2009. It provides for the establishment of Fideicomiso Uruguayo de Ahorro y Eficiencia Energética (FUDAEE, Uruguayan Trust for Energy Saving and Efficiency). A decree approving FEDAEE was promulgated in Mar 2012. Venezuela, Gaseous automotive fuels: 106,000 CNG vehicles at end-2011. A Sharply falling power tariffs and petroleum R. B. de Jul 2008 official gazette set a goal for bifuel (gasoline/CNG) product prices in real terms have made 91 Country Pa Diversification Conservation vehicles. Government reports that its 2011 goal for bifuel vehicles energy conservation campaigns ineffective. was nearly met. In Oct 2009, government issued a decree The Development Plan for Renewable Energy Sources, which is a creating a power ministry and banning part of the Plan for Economic and Social Development of the Nation imports of inefficient electric devices. In 2007–2013, includes incentives for alternative, renewable, and 2009, football teams played during the day environmentally sustainable energy sources (solar, wind, biomass, to save electricity. Effective Jul 2011, mini- and micro-hydropower, geothermal) while concurrently aiming government imposed surcharges on those to increase electricity generation with fossil fuel. who did not reduce consumption by 10%, and offered discounts to households that reduced by 10–20% and higher discounts for reductions of more than 20%. The parliament passed an EE law in Nov 2011, limiting monthly consumption to 500–1500 kWh depending on location, above which much higher charges are incurred. Efficient lighting: Tens of millions of CFLs have been distributed. Vietnam Liquid biofuels: Vietnam targets meeting 1% of gasoline demand Vietnam had a power efficiency and with ethanol by 2015. Ethanol feedstocks are cassava and sugarcane. conservation program in 2006–10. As part of government’s biofuel development master plan, Government holds national contests for PetroVietnam started selling E5 in 5 cities in Aug 2010, and plans to effective energy management. Law on sell it nation-wide in 2012. Energy Efficiency and Conservation came Vietnam plans to diversify to coal in power generation, targeting into effect in Jan 2011. EVN has an annual 50% of power from coal by 2020. campaign during the dry season between Alternative energy targets: RE share of primary energy 5% by 2020, Apr and Jun, aiming to reduce power 8% by 2025, and 11% by 2050; RE share of power generation 5% by consumption by 10% from the year before. 2020. EVN also promotes solar water heating. Electricity of Vietnam (EVN) in Dec 2011 signed an agreement with Hanoi turned off one-third of street lights 6 local companies to promote solar water heater. after 11 P.M. in Apr–Jun 2011, and required every office to turn off power after work hours. A project promoting energy conservation in small and medium enterprises funded by the Global Environment Facility reportedly saved 232,000 tonnes of oil equivalent during 2006–2010. Hanoi announced higher parking fees in Jan 2012, which would discourage driving. Yemen, √ Alternative energy targets for 2025: RE share of power generation RCREEE member. The national strategy for Rep. 15%, specific installed capacity targets for wind, solar PV, RE and EE targets a 15% increase in EE by concentrating solar power, geothermal, and biomass. 2025, but the baseline is unclear. A national strategy for RE and EE approved in Jun 2009. Zambia Liquid biofuels: The 6th National Development Plan for 2011–15 The 6th National Development Plan calls for sets a series of increasing annual targets for blending ethanol in formulation and implementation of an EE gasoline and biodiesel in diesel, with E10 and B5 in the final year. strategy. Sources: IEA 2012b; USDA 2012a; REEEP; REN21 2012; IANGV; WLPGA 2012; Platts 2009c; Platts 2011a; Reuters 2010a; Bangladesh 2012a; Cocha Banner 2011; IHS 2012b; Platts Oilgram Price Report 2010; Energy Economist 2011a; Xinhua News Agency 2012f; Dow Jones 2009b; IHS 2008; European Union 2012; Interfax 2009a; APA 2012; Sudan Tribune 2009; Capital 2012; UNECA 2012; Energy Foundation Ghana 2011; Asia Pulse 2011c; Jakarta Globe 2012a; Dow Jones 2011a; Energy Partner 2012; Dow Jones 2009a; Kenya 2009; BBC 2009; APA 2010; Malaysia Digest 2012; Business News Americas 2010b; ISI Emerging Markets 2009; NamPower 2007; Daily Times 2010 and 2012; Baluchistan Times 2009; Business Recorder 2010a; Business News Americas 2009; ADP 2010; Asia Pulse 2009; Shell 2010; SKRIN 2011; World Bank undated; Sunday Observer (Sri Lanka) 2012; Sri Lanka News 2012b; Daily News (Sri Lanka) 2012; Lanka News 2012; Asia-Plus 2009; Thai News Service 2011a, 2011e, 2012b, 2013a; Platts Oilgram News 2012a; Bangkok Post 2011; Nation (Thailand) 2011; Dow Jones 2011b; EPPO 2012a; Business News Americas 2010a; Canadian Press 2009; Business News Americas 2011b; ADP 92 2009; Saigon Times 2009; Vietnam News Brief Service 2011a and 2011b; VietBiz24 2012; Thai News Service 2010a, 2011f, 2011h; Asia Pulse 2010; ESMAP 2009; government, utility, and national oil company Web sites and their announcements. a. √ under P signals 20 percent or more of power generation from petroleum products. 93 Appendix 3: Fuel Prices and Pass-Through Coefficients Figures A3.1–A3.4 show retail prices in the study countries in July 2012 for gasoline, diesel, kerosene, and LPG, respectively. FOB prices of the fuels in four major refining centers— Northern Europe, Arab Gulf, Singapore, and U.S. Gulf Coast—are noted for comparison. Because of transport, storage, and retailing costs, taxes and other fees, and profit margins at each stage in the supply chain, retail prices are considerably higher than the benchmark FOB prices in deregulated markets. If retail and FOB prices are close, that is likely to signal subsidies. Figure A3.5 plots the ratio of the price of kerosene to that of diesel in countries where information on kerosene prices was available. Table A3.1 lists pass-through coefficients between January 2009 and July 2012. The calculation methodology and the sources of benchmark FOB prices are the same as those described in Kojima (2012), with one difference. A much more detailed study of the transmission of world oil price increases in 12 major EU countries found that the increases were passed on to consumers within three to five weeks (Meyler 2009), or about a month. These countries can safely be assumed to be passing on prices increases on the global oil market fully to their domestic markets. This study therefore takes reference benchmark prices from the month before―December 2008 and June 2012―as more appropriate measures of gauging the extent of pass through between two time periods. The sources of retail information are the same as those in Kojima (2012) except Uganda, where the price survey results reported by the Uganda Bureau of Statistics were used instead. As mentioned in Kojima (2012), the pass-through coefficients in Uganda are low because the country experienced acute fuel shortages in January 2009, pushing up prices. The limitations of the methodology approached to compute these coefficients are discussed in detail in Kojima (2012, 6–8). The prices available in Jamaica are ex-refinery inclusive of taxes and exclude distribution margins. The tax-inclusive ex-refinery prices were used for computing the ratio of kerosene to diesel prices in Figure A3.5 and pass-through coefficients for the four fuels in Table A3.1. The fuel prices in Uruguay are ceilings on wholesale prices set by the government and adjusted from time to time. They appear to be close to retail prices, and hence have been retained as retail. 94 Figure A3.1: Retail gasoline prices in July 2012, US$ per liter Angola 0.63 Argentina 1.32 Bangladesh 1.15 Bolivia 0.69 Brazil 1.34 Cambodia 1.24 Cameroon 1.07 Chile 1.49 China 1.17 Colombia 1.41 Costa Rica 1.53 Côte d'Ivoire 1.45 Dominican Republic 1.40 Egypt, Arab Rep. 0.29 El Salvador 1.04 Ethiopia 1.06 Gabon 1.00 Ghana 0.91 Guatemala 1.13 Guinea-Bissau 1.50 Honduras 1.15 India 1.22 Indonesia 0.48 Iran, Islamic Rep. 0.33 Iraq 0.39 Jordan 0.99 Kazakhstan 0.71 Kenya 1.34 Lao PDR 1.25 Liberia 1.23 Madagascar 1.43 Malawi 1.64 Malaysia 0.60 Mexico 0.76 Mongolia 1.17 Morocco 1.36 Mozambique 1.68 Namibia 1.15 Nepal 1.34 Nicaragua 1.20 Niger 1.08 Nigeria 0.62 Pakistan 0.90 Panama 0.96 Peru 1.37 Philippines 1.18 Russian Federation 0.85 Rwanda 1.67 Senegal 1.59 South Africa 1.29 Sri Lanka 1.12 Syrian Arab Republic 0.78 Tajikistan 1.37 Tanzania 1.38 Thailand 1.32 Togo 1.11 Tunisia 0.85 Turkey 2.20 Uganda 1.47 Uruguay 1.73 Venezuela, RB 0.02 Vietnam 1.00 Yemen, Rep. 0.58 Zambia 1.68 0 0.5 1 1.5 2 2.5 Sources: See Table A2.1 in Kojima (2012). Note: The FOB prices in July 2012 varied between US$0.69 and 0.76 per liter depending on location and quality. 95 Figure A3.2: Retail diesel prices in July 2012, US$ per liter Angola 0.42 Argentina 1.42 Bangladesh 0.75 Bolivia 0.54 Brazil 1.02 Cambodia 1.18 Cameroon 0.97 Chile 1.13 China 1.16 Colombia 1.17 Costa Rica 1.23 Côte d'Ivoire 1.15 Dominican Republic 1.33 Egypt, Arab Rep. 0.18 El Salvador 1.01 Ethiopia 0.95 Gabon 0.88 Ghana 0.92 Guatemala 0.99 Guinea-Bissau 1.34 Honduras 1.05 India 0.74 Indonesia 0.48 Iran, Islamic Rep. 0.29 Iraq 0.30 Jordan 0.73 Kazakhstan 0.60 Kenya 1.20 Lao PDR 1.10 Liberia 1.27 Madagascar 1.18 Malawi 1.64 Malaysia 0.57 Mexico 0.79 Mongolia 1.26 Morocco 0.91 Mozambique 1.30 Namibia 1.21 Nepal 1.04 Nicaragua 1.09 Niger 1.08 Nigeria 1.06 Pakistan 1.03 Panama 0.97 Peru 1.29 Philippines 0.95 Russian Federation 0.91 Rwanda 1.62 Senegal 1.44 South Africa 1.23 Sri Lanka 0.87 Syrian Arab Republic 0.31 Tajikistan 1.36 Tanzania 1.29 Thailand 0.94 Togo 1.18 Tunisia 0.74 Turkey 1.97 Uganda 1.26 Uruguay 1.65 Venezuela, RB 0.01 Vietnam 0.96 Yemen, Rep. 0.47 Zambia 1.56 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 $2.00 Sources: See Table A2.1 in Kojima (2012). Note: The FOB prices in July 2012 varied between US$0.72 and 0.77 per liter depending on location and quality. 96 Figure A3.3: Retail kerosene prices in July 2012, US$ per liter Angola 0.27 Argentina 1.09 Bangladesh 0.75 Bolivia 0.39 Cambodia 1.23 Cameroon 0.66 Chile 1.19 Costa Rica 1.10 Côte d'Ivoire 1.16 Dominican Republic 1.21 Egypt, Arab Rep. 0.18 Ethiopia 0.78 Gabon 0.51 Ghana 0.48 Guatemala 1.18 Honduras 0.90 India 0.27 Indonesia 0.27 Iraq 0.29 Jordan 0.73 Kenya 0.93 Liberia 1.27 Madagascar 0.88 Malawi 0.62 Mozambique 0.99 Nepal 1.04 Nicaragua 1.11 Niger 0.93 Nigeria 0.32 Pakistan 0.92 Philippines 1.16 Senegal 1.12 South Africa 0.90 Sri Lanka 0.80 Tanzania 1.28 Thailand 1.12 Togo 0.92 Tunisia 0.50 Turkey 1.60 Uganda 1.10 Uruguay 1.25 Vietnam 0.96 Yemen, Rep. 0.47 Zambia 1.06 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 Sources: See Table A2.1 in Kojima (2012). Note: The FOB prices in July 2012 varied between US$0.72 and 0.76 per liter depending on location. 97 Figure A3.4: LPG prices in July 2012, US$ per kilogram Angola 0.39 Argentina 0.35 Bangladesh 1.37 Bolivia 0.33 Brazil 1.49 Cambodia 1.47 Cameroon 0.90 Chile 1.75 China 1.07 Costa Rica 1.40 Côte d'Ivoire 0.56 Dominican Republic 1.15 Egypt, Arab Rep. 0.04 El Salvador 0.96 Ethiopia 2.22 Gabon 0.82 Ghana 0.69 Guatemala 1.11 Honduras 1.02 India 0.51 Indonesia 0.45 Iraq 0.32 Jordan 0.73 Kenya 2.21 Lao PDR 1.25 Madagascar 2.74 Malawi 4.74 Malaysia 0.60 Mexico 0.86 Morocco 0.37 Mozambique 1.96 Nepal 1.11 Nicaragua 0.85 Niger 0.56 Nigeria 2.38 Pakistan 0.88 Panama 0.39 Peru 1.35 Philippines 1.29 Senegal 1.07 South Africa 2.54 Sri Lanka 1.35 Syrian Arab Republic 0.68 Thailand 0.57 Togo 0.58 Tunisia 0.35 Turkey 2.81 Uganda 2.95 Uruguay 1.34 Venezuela, RB 0.09 Vietnam 1.24 Yemen, Rep. 0.56 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 Sources: See Table A2.1 in Kojima (2012). Note: The FOB prices in July 2012 varied between US$0.45 and 0.62 per kg depending on location and LPG composition. 98 Figure A3.5: Ratio of retail kerosene prices to retail diesel prices in July 2012 Angola 0.65 Argentina 0.77 Bangladesh 1.00 Bolivia 0.73 Cambodia 1.04 Cameroon 0.67 Chile 1.05 Costa Rica 0.89 Côte d'Ivoire 1.00 Dominican Republic 0.91 Egypt, Arab Rep. 1.00 Ethiopia 0.82 Gabon 0.59 Ghana 0.53 Guatemala 1.20 Honduras 0.85 India 0.36 Indonesia 0.56 Iraq 0.97 Jamaica 1.01 Jordan 1.00 Kenya 0.78 Liberia 1.00 Madagascar 0.75 Malawi 0.38 Mozambique 0.76 Nepal 1.00 Nicaragua 1.02 Niger 0.86 Nigeria 0.30 Pakistan 0.90 Philippines 1.22 Senegal 0.78 South Africa 0.74 Sri Lanka 0.92 Tanzania 0.99 Thailand 1.19 Togo 0.78 Tunisia 0.68 Turkey 0.81 Uganda 0.87 Uruguay 0.76 Vietnam 1.00 Yemen, Rep. 1.00 Zambia 0.68 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 Sources: Figures A3.2 and A3.3. Note: The ratio for Jamaica is that of ex-refinery prices and taxes but excludes distribution margins. 99 Table A3.1: Pass-through coefficients between January 2009 and July 2012 Country Gasoline Diesel Kerosene LPG Angola 24 11 -22 -27 Argentina 102 143 94 -60 Bangladesh 8 33 33 135 Bolivia 2 2 2 3 Brazil 57 30 ― 199 Cambodia 133 142 150 155 Cameroon -18 -24 -15 -17 Chile 188 127 91 297 China 100 127 ― 87 Colombia 91 126 111 256 Costa Rica 134 104 89 224 Cote d'Ivoire 21 -18 69 -11 Dominican Republic 133 155 150 182 Egypt, Arab Rep. -6 -5 -5 -1 El Salvador 103 118 ― 306 Ethiopia 82 89 81 185 Gabon -20 -9 -12 -24 Ghana 57 64 -23 46 Guatemala 101 100 90 11 Guinea-Bissau 61 77 ― ― Honduras 114 123 123 287 India 76 24 25 18 Indonesia 19 23 13 18 Iran, Islamic Rep. 57 82 ― ― Iraq 11 -13 51 10 Jamaica 119 136 147 277 Jordan 124 69 70 7 Kazakhstan 32 7 ― ― Kenya 95 93 ― ― Lao PDR 138 140 ― 101 Liberia 128 124 120 ― Madagascar 18 9 13 216 Malawi -36 -8 -170 ― Malaysia 30 28 ― 28 Mexico 53 80 ― 119 Mongolia 70 57 ― ― Morocco 5 -91 ― -6 Mozambique 177 66 71 95 Namibia 134 145 ― ― Nepal 79 88 86 20 Nicaragua 101 110 84 65 Niger 15 -9 26 ― Nigeria 39 166 -8 325 Pakistan 45 94 84 7 Panama 100 113 ― 0 Peru 112 133 ― 185 100 Country Gasoline Diesel Kerosene LPG Philippines 132 101 114 109 Russian Federation 49 74 ― ― Rwanda 82 84 ― ― Senegal 122 132 99 58 South Africa 168 177 124 143 Sri Lanka 17 77 111 91 Syrian Arab Republic -20 -69 ― 64 Tajikistan 143 202 ― ― Tanzania 105 61 187 ― Thailand 176 128 17 13 Togo 24 56 ― ― Tunisia -18 -19 -5 -15 Turkey 127 175 104 165 Uganda 12 14 3 209 Uruguay 139 166 129 197 Venezuela, RB -4 -3 ― -46 Vietnam 89 96 78 -18 Yemen, Rep. 72 90 91 94 Zambia 125 146 91 ― Sources: Author’s calculations based on sources cited in Tables A2.1 and A2.3 in Kojima (2012) and sources under “information� in Table A1.1. 101 References ADP. 2009. “Venezuela to create electricity min.� October 22. ———. 2010. “Peru cuts power demand by 53 MW with energy-saving bulbs.� June 18. ———. 2011. “Mexico govt wants to cut LPG subsidies.� December 7. AFP (Agence France-Presse). 2008. “Cameroon government raises violence death toll to 40.� March 10. ———. 2011a. “Russian region issues ration coupons for petrol: report.� May 18. ———. 2011b. “Malawi riots death toll rises to 19 as army chief replaced.� July 23. ———. 2012a. “Petrol panic eases in Egypt.� January 19. ———. 2012b. “Jordan says Egypt gas cuts cost Amman $2 bln.� April 23. ———. 2012c. “Jordan charges 3 opposition activists with ‘incitement’.� November 25. ———. 2013. “Syria raises petrol, flour prices.� January 21. AFRAA (African Airlines Association). 2012. “AFRAA launches joint fuel purchase project.� January 12. Africa Energy Intelligence. 2011. “Fight against smuggling.� October 13. Afriquinfos. 2012. “Probable increase in fuel prices at the pump in 2012.� January 4. Ahram Online. 2013. “Egypt delays cuts in fuel subsidies to tourism sector.� February 8. Akhbar. 2011. “Syria: Diesel crisis hits hard as winter approaches.� December 15. All Africa. 2011a. “Bulk fuel storage to increase.� February 14. ———. 2011b. “Gas shortages see residents turn to alternative energy, electricity.� April 18. ———. 2011c. “Mozambique: General subsidies unsustainable – Cuereneia.� May 8. ———. 2011d. “Marketer takes delivery under questionable circumstance.� July 11. ———. 2011e. “Drivers want subsidy on LPG removed.� August 19. ———. 2011f. “More tax cuts on fuel planned for Jan 2012.� October 24. ———. 2012a. “Zambia: Lifting lid on country’s fuel prices.� January 5. ———. 2012b. “Rwanda: Fuel storage facilities to be expanded by 150 million liters.� March 21. ———. 2012c. “Mozambique: Government Restructures Imopetro.� November 14. ———. 2013. “2012, Year of probes in Nigeria’s oil industry.� January 2. Antara News. 2012. “Indonesian government seeking gradual rise in subsidized fuel prices.� October 28. AP (Associated Press). 2010a. “Malaysia govt plans fuel and other subsidy cuts to avoid becoming bankrupt by 2019.� May 27. ———. 2010b. “Venezuela approves law cracking down on smuggling of cheap gasoline, minerals, other goods.� December 28. ———. 2011. “Venezuela breaks up smuggling ring accused of trying to sell heavily subsidized fuel abroad.� July 30. ———. 2012. “Rumors fuel long lines, gasoline shortages across Egypt with fears of impending price hike.� January 18. 102 APA (Agence Apapress). 2010. “Malawi govt to distribute free energy-saving bulbs soon.� August 5. ———. 2011a. “Mozambique govt to subsidize food, transport to poor citizens.� March 30. ———. 2011b. “Mozambique’s general subsidies unsustainable-official.� May 11. ———. 2012. “Ethiopia to save 176MW per annum with power-saving bulbs.� January 13. Argentina. Ministerio de Planificación Federal, Inversión Pública y Servicios. 2007. “Programa de Energía Total: Resolución 459/2007.� http://institucional.minplan.gov.ar/html/energia_total/resolucion_459.php. Arze del Granado, Francisco Javier, David Coady, and Robert Gillingham. 2012. “The Unequal Benefits of Fuel Subsidies: A Review of Evidence for Developing Countries.� World Development 40(11): 2234–2248. www.sciencedirect.com/science/article/pii/S0305750X12001155#. Asia-Plus. 2009. “Tajikistan introduces import ban on incandescent lamps beginning on October 1, 2009.� August 28. Asia Pulse. 2009. “Philippines govt scores LPG suppliers on premature price hikes.� September 2. ———. 2010. “Vietnam’s electricity conservation program returns 30% more: min.� December 17. ———. 2011a. “Vietnam’s Petrolimex posts Q1 loss of US$123.81mln.� April 6. ———. 2011b. “Subsidized fuels abused by industries: Indonesia’s Pertamina.� June 24. ———. 2011c. “SBY asks Indonesian local govts to back energy saving plan.� July 29. Authentix. 2012. “Authentix and SGS awarded renewal of fuel marking program in Republic of Senegal.� www.authentix.com/news.asp?id=press-releases&news=218. Automation World. 2011. “Indian oil firms take up automation of petrol stations.� August 16. Bacon, Robert, and Masami Kojima. 2006. “Coping with Higher Oil Prices.� ESMAP Report 323/06. Washington DC: World Bank. http://www.esmap.org/esmap/sites/esmap.org/files/FR323- 06_GBL_Coping_with_Higher_Oil_Prices.pdf. ———. 2008. “Coping with Oil Price Volatility.� ESMAP Special Report 005/08. Washington DC: World Bank. http://esmap.org/esmap/sites/esmap.org/files/8142008101202_coping_oil_price.pdf. ———. 2010a. “Expenditures of low-income households on energy: Evidence from Africa and Asia.� Extractive Industries for Development Series #16. Washington DC: World Bank. http://siteresources.worldbank.org/EXTOGMC/Resources/336929-1266963339030/ eifd16_expenditure.pdf. ———. 2010b. “Rockets and Feathers: Asymmetric Petroleum Product Pricing in Developing Countries.� Extractive Industries for Development Series #18. Washington DC: World Bank. http://siteresources.worldbank.org/EXTOGMC/Resources/336929-1266963339030/ eifd18_rockets_feathers.pdf. Baig, Taimur, Amine Mati, David Coady, and Joseph Ntamatungiro. 2007. “Domestic Petroleum Product Prices and Subsidies: Recent Developments and Reform Strategies.� IMF Working Paper WP/07/71. Washington DC: International Monetary Fund. www.imf.org/external/pubs/ft/wp/2007/wp0771.pdf. Baluchistan Times. 2009. “New PEPCO system charges differently day, night.� May 7. Bangkok Post. 2011. “PLANNING – 20-year energy efficiency budget to cost B400bn.� July 29. Bangladesh. Ministry of Finance. 2012a. “Power and Energy Sector Road Map: Second Update.� www.mof.gov.bd/en/budget/12_13/power/power_energy_en.pdf. 103 ———. 2012b. “Chapter 16: Ministry of Agriculture.� www.mof.gov.bd/en/budget/12_13/genbudget/en/chpt-16.pdf. BBC. 2009. “Kenya to start rationing electricity.� August 6. ———. 2012. “Iraq ready to supply Jordan with oil at preferential price – envoy.� November 28. BMI (Business Monitor International). 2011. “Fuel supply crisis forces further reforms at Mombasa refinery.� May 11. ———. 2012. “Cameroon – Keeping fuel subsidies in place.� May 18. ———. 2013. “Middle East – Subsidy reform: Is the time nigh?� January 29. Borneo Post. 2012. “New rule for local fishermen to reduce catch leakages.� August 8. Business Daily. 2011. “Vandals cost Kenya power Sh30 million.� December 23. Business News Americas. 2009. “Government campaign aims to save 2.68GWh/month.� October 22. ———. 2010a. “Government shelves energy savings technical team.� July 21. ———. 2010b. “Energy savings program to cut bills by 18%.� December 30. ———. 2011a. “Ministry tags private vehicles in bid to stop smuggling.� June 3. ———. 2011b. “National assembly passes efficiency bill at second reading.� November 23. ———. 2012. “Transport firms rule out fare hikes, strikes during negotiations over state subsidies.� September 10. Business Recorder. 2009a. “LPG being sold above prices fixed by OGRA.� January 10. ———. 2009b. “State Bank blocks one-year ‘oil price hedging plan’.� August 24. ———. 2010a. “Pepco to adopt latest techniques to reduce power theft.� May 3. ———. 2010b. “Fuel stock storage: OMCs except PSO violated licensing pact.� September 29. ———. 2011. “Pak-Iran border: LPG smuggling worries Ogra.� December 13. Cambio. 2012. “El Gobierno del presidente Evo Morales garantizó que en 2012 no habrá nivelación de precios o ‘gasolinazo’, porque están los recursos económicos para mantener la subvención.� January 23. www.cambio.bo/noticia.php?fecha=2012-01-23&idn=62970. Canadian Press. 2009. “Venezuela’s soccer teams to play daytime games to help conserve electricity.� October 29. Capital. 2012. “Government spends over 2.4 bln birr for subsidy.� March 28. Cárdenas Valero, Juan Carlos. 2010. “Evaluación Económica del Fondo de Estabilización de Precios de los Combustibles en Colombia.� Master’s thesis for the National University of Colombia. Central Bank of Sri Lanka. 2012. “Recent Economic Development: Highlights of 2012 and Prospects for 2013.� www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/recent_economic_development/ RED2012/Red2012e/red_content_e.htm. Central Reserve Bank of Peru. 2012. “Operations del sector public no financier: Diciembre 2011.� Nota de Estudios del BCRP No. 6. www.bcrp.gob.pe/docs/Publicaciones/Notas-Estudios/2012/nota-de- estudios-06-2012.pdf. China Daily. 2012. “Taxis get subsidy to soften fuel hike blow.� March 22. Citi FM. 2013. “NPA demands removal of fuel subsidy.� February 11. 104 Coady, David, and David Newhouse. 2006. “Ghana: Evaluating the Fiscal and Social Costs of Increases in Domestic Fuel Prices.� In Poverty and Social Impact Analysis of Reform: Lessons and Examples from Implementation, ed. Aline Coudouel, Anis A. Dani, and Stefano Paternostro, 387– 413. Washington DC: World Bank. Coady, David, Robert Gillingham, Rolando Ossowski, John Piotrowski, Shamsuddin Tareq, and Justin Tyson. 2010. “Petroleum Product Subsidies: Costly, Inequitable, and Rising.� IMF Staff Position Note 10/05. www.imf.org/external/pubs/ft/spn/2010/spn1005.pdf. Coady, David, Valentina Flamini, and Matias Antonio. 2012. “Fueling Risk.� Finance & Development (September): 48–49. Cocha Banner. 2011. “Lights Out – Incandescent light bulbs to be replaced nation-wide.� November. Costa Rica Star. 2012. “Costa Rica: agency says subsidized fuel used illegally.� November 8. Daily News (Sri Lanka). 2012. “Ministry leads the way to save power.� April 25. Daily News (Tanzania). 2011. “Kerosene imports go down by 70pc.� October 18. ———. 2012a. “TRA Launches Anti-Dumping Technology.� March 13. ———. 2012b. “Oil Sector Hails Muhongo over BPS Reports.� August 22. Daily Times. 2010. “5-day working week, markets’ closure at 8pm announced.� April 23. ———. 2012. “20m energy savers’ contract awarded to Philips.� June 14. Dow Jones. 2009a. “Kenya mfg assoc calls on members to reduce pwr use.� July 1. ———. 2009b. “Chile govt launches truck-exchange program to save fuel.� September 4. ———. 2010a. “Peru to cut diesel taxes for some users; move may raise demand.� August 27. ———. 2010b. “China caps state cos’ fuel futures trading; 90% of spot.� October 20. ———. 2011a. “Jordan to ration electricity on Egypt gas supply suspension.� March 8. ———. 2011b. “Thai cabinet rejects auto excise tax restructuring plan.� May 4. ———. 2011c. “Uganda issues new tenders to increase fuel reserve tanks.� June 28. ———. 2011d. “India unveils ambitious new strategic oil stockpile plans.� December 21. ———. 2012a. “Mongolia government mulling increase in gasoline stocks.� February 1. ———. 2012b. “Colombia lawmakers to examine Ecopetrol’s hedging.� April 23. East African. 2010. “Tanzania to unveil tool to check fuel offences.� May 12. Economist. 2012. “The Perils of Petrobras.� November 17. ———. 2013. “Venezuela’s economy: Out of stock.� February 9. Egypt Independent. 2012a. “Woman dies in clashes over scarce butane gas cylinders.� January 23. ———. 2012b. “6 killed, others wounded in Monufiya fight over gas cylinders.� July 23. EIU (Economist Intelligence Unit). 2011. “Venezuela electricity: Power hungry.� June 27. ———. 2012. “Egypt economy: Quick view – Oil minister gives details of fuel subsidy cuts.� September 25. El Mundo. 2011. “Inicia pago de subsidio GLP en cuenta.� August 2. Energy Economist. 2011a. “Brazil power plan: no new fossil fuel plants after 2014.� January 1. 105 ———. 2011b. “Gasoline shortages.� June 3. Energy Foundation Ghana. 2011. “Replacement of incandescent bulbs.� May 30. Energy Partner. 2012. “Kazakhstan’s President signed the Law ‘On Energy Efficiency and Energy saving’.� January 17. Energypedia. 2013. “International Fuel Prices.� https://energypedia.info/index.php/International_Fuel_Prices. EPPO (Energy Policy and Planning Office). 2012a. “Price Structure of Petroleum Products in Bangkok.� www.eppo.go.th/petro/price/index.html. ———. 2012b. “Energy Statistics.� www.eppo.go.th/info/index-statistics.html. ESMAP (Energy Sector Management Assistance Program). 2009. “Large-Scale Residential Energy Efficiency Programs Based on Compact Fluorescent Lamps (CFLs): Approaches, Design Issues, and Lessons Learned.� www.esmap.org/sites/esmap.org/files/2162010114742_CFL_ Toolkit_Report_Rev_Feb_15_2010_Final_PRINT_VERSION.pdf. Estupiñán, Nicolás, Andrés Gómez-Lobo, Ramón Muñoz-Raskin, and Tomás Serebrisky. 2007. “Affordability and Subsidies in Public Urban Transport: What Do We Mean, What Can Be Done?� World Bank Policy Research Working Paper No. 4440. http://hdl.handle.net/10986/5340. Ethiopian Reporter. “Fuel shortage hits Addis as E10 makes a comeback.� January 14. European Union. 2012. “Country Environment Profile: Royal Kingdom of Cambodia.� http://eeas.europa.eu/delegations/cambodia/documents/publications/country_env_profile_cam_ap ril_2012_en.pdf. Financial Daily. 2011. “SC urged to take notice of petrol shortage.� June 13. ———. 2012. “LPG mafia alleged of graft.� March 3. Financial Express. 2011. “Trucks, lorries hike fares.� September 21. Financial Times. 2011. “Russia to cut petrol exports as fuel crisis hits.� April 28. ———. 2013. “China’s foreign oil drive set to continue.� March 24. Gámez, Susana. 2012. “Programme Bonogaz.� Presentation made to the government of Tunisia. GESTOCI (Société de Gestion des Stocks Pétroliers de Côte d’Ivoire). Undated. “History of the GESTOCI.� www.gestoci.ci/english_version/pages/historique.php. Ghanaian Times. 2010. “Ghana opts for hedging – oil prices to be stabilized.� April 8. ———. 2012. “Addressing effects of fuel price hikes: Government plans quarterly hedging.� January 30. GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit). 2011. “Increasing and Volatile Oil Prices: Impact – Subsidies, Pricing Mechanisms and Taxes – Policy Responses.� www.transport2012.org/bridging/ressources/documents/2/1523,RL-IOP-EN.pdf. ———. 2012. “Urban Transport and Energy Efficiency. Moduel 5h. Sustainable Transport: A Sourcebook for Policy-makers in Developing Cities.� Bonn. www2.gtz.de/wbf/4tDx9kw63gma/SUT_module5h.pdf. GSI (Global Subsidies Initiative). “Fossil-fuel subsidies.� www.iisd.org/gsi/fossil-fuel-subsidies. Global Post. 2009. “Dakar hit by shortage of cooking gas.� February 17. Guardian. 2010. “Government pledges ‘smooth supply’ of oil products in Nigeria.� February 2. ———. 2011a. “Explainer: Why are people demonstrating in Malawi?� July 22. 106 ———. 2011b. “Nigeria to set up special body to manage funds accruing after oil subsidy removal.� October 26. Guillaume, Dominique, Roman Zytek, and Mohammad Reza Farzin. 2011. “Iran–The Chronicles of the Subsidy Reform.� Washington DC: IMF. www.imf.org/external/pubs/ft/wp/2011/wp11167.pdf. Hassanzadeh, Elham. 2012a. “Recent Developments in Iran’s Energy Subsidy Reforms.� Policy Brief. International Institute for Sustainable Development. www.iisd.org/gsi/sites/default/files/pb14_iran.pdf. ———. 2012b. Personal communication. Himalayan Times. 2012a. “NOC increases transportation cost restarts dual pricing.� January 22. ———. 2012b. “Diesel LPG shortage threatens to shut schools.� February 3. ———. 2012c. “Students to get subsidy on LPG.� September 11. ———. 2012d. “NOC verifies 5000 LPG consumers in five months.� September 21. Hindu. 2011. “Brazen criminality.� January 31. Hindustan Times. 2011. “Investigative journalists vulnerable.� June 12. IACtHR (Inter-American Court of Human Rights). 2002. “Caracazo v. Venezuela.� www.worldcourts.com/iacthr/eng/decisions/2002.08.29_Caracazo_v_Venezuela.pdf. IANGV (International Association for Natural Gas Vehicles). “Current Natural Gas Vehicle Statistics.� Online database. www.iangv.org/current-ngv-stats/. IEA (International Energy Agency). 2005. Saving Oil in A Hurry. Paris: OECD/IEA. ———. 2012a. “Energy Prices and Taxes: Fourth Quarter 2012.� Paris: OECD/IEA. ———. 2012b. “IEA World Energy Statistics and Balances.� Subscription online database. ———. 2012c. “World Oil Statistics.� Subscription online database. IEA (International Energy Agency), OPEC (Organization for Petroleum Exporting Countries), OECD (Organisation for Cooperation and Development), and World Bank. 2011. “Joint report by IEA, OPEC, OECD and World Bank on fossil-fuel and other energy subsidies: An update of the G20 Pittsburgh and Toronto Commitments.� Prepared for the G20 Meeting of Finance Ministers and Central Bank Governors, Paris, October 14–15, and the G20 Summit, Cannes, November 3–4. www.oecd.org/env/49090716.pdf. IHS. 2005. “Yemeni government climbdown on fuel prices following violent protests.� July 27. ———. 2008. “Road traffic restrictions introduced in Costa Rica.� IHS Global Insight Daily Analysis, June 26. ———. 2009. “Oil smugglers control third of Philippines industry, says Petron.� IHS Global Insight Daily Analysis, September 21. ———. 2010a. “Oil minister suspended over fuel shortages in Yemen.� IHS Global Insight Daily Analysis, January 13. ———. 2010b. “Plummeting import prices lower Syria’s oil subsidies deficit by 96% in 2009.� IHS Global Insight Daily Analysis, February 11. ———. 2010c. “Government of Malaysia backs down on fuel subsidy cuts.� IHS Global Insight Daily Analysis, March 4. 107 ———. 2010d. “Argentina forced to import gasoline supplies.� IHS Global Insight Daily Analysis, March 11. ———. 2010e. “Government orders fuel price cuts in Argentina.� IHS Global Insight Daily Analysis, August 19. ———. 2010f. “BPH Migas prders Pertamina to stop selling subsidized fuels to industries.� IHS Global Insight Daily Analysis, September 21. ———. 2010g. “Mauritania supplies butane gas to Senegal to alleviate shortages.� IHS Global Insight Daily Analysis, October 22. ———. 2011a. “Fuel products subsidies policy reversal implemented in Syria and Jordan.� IHS Global Insight Daily Analysis, January 17. ———. 2011b. “Chronic fuel shortages continue in Malawi.� IHS Global Insight Daily Analysis, February 14. ———. 2011c. “Russia bans petrol exports due to shortages.� IHS Global Insight Daily Analysis, April 29. ———. 2011d. “Tajikistan raises fuel prices following shortages in supply from Russia.� IHS Global Insight Daily Analysis, September 22. ———. 2011e. “Butane crisis continues in Egypt amidst mounting payment pressure.� IHS Global Insight Daily Analysis, December 12. ———. 2012a. “Niger’s government increases civil service wages and cuts water and electricity costs.� IHS Global Insight Daily Analysis, February 9. ———. 2012b. “Brazilian government unveils ethanol financing programme.� IHS Global Insight Daily Analysis, February 28. ———. 2012c. “Argentine government orders companies to freeze jet fuel prices.� IHS Global Insight Daily Analysis, March 14. ———. 2012d. “Chilean congress approves changes to fuel-price stabilisation system.� IHS Global Insight Daily Analysis, September 18. IMF (International Monetary Fund). 2010. “Togo: Third Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility.� IMF Country Report No. 10/50.� http://www.imf.org/external/pubs/ft/scr/2010/cr1050.pdf. ———. 2011a. “Dominican Republic: Second and Third Reviews Under the Stand-By Arrangement and Request for Waivers of Applicability—Staff Report; Staff Supplement; Informational Annex; Press Release on the Executive Board Discussion.� IMF Country Report No. 11/71. www.imf.org/external/pubs/ft/scr/2011/cr1171.pdf. ———. 2011b. “Togo: 2011 Article IV Consultation and Sixth Review Under the Extended Credit Facility Arrangement—Staff Report; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for Togo.� IMF Country Report No. 11/240. www.imf.org/external/pubs/ft/scr/2011/cr11240.pdf. ———. 2011c. “Republic of Mozambique: Staff Report for the Third Review Under the Policy Support Instrument and Request for Modification of Assessment Criteria—Staff Report; Supplement; and Press Release.� IMF Country Report No. 11/350. www.imf.org/external/pubs/ft/scr/2011/cr11350.pdf. ———. 2012a. “Rwanda: Third Review Under the Policy Support Instrument—Staff Report; Staff Supplement; Press Release on the Executive Board Discussion; and Statement by the Executive 108 Director for Rwanda.� IMF Country Report No. 12/15. www.imf.org/external/pubs/ft/scr/2012/cr1215.pdf. ———. 2012b. “Ghana: Fifth Review Under the Three-Year Arrangement Under the Extended Credit Facility and Request for Modification of Performance Criteria—Staff Report; Staff Supplements; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Ghana.� IMF Country Report No. 12/36. www.imf.org/external/pubs/ft/scr/2012/cr1236.pdf. ———. 2012c. “Bangladesh: Request for a Three-Year Arrangement under the Extended Credit Facility.� IMF Country Report No. 12/94. www.imf.org/external/pubs/ft/scr/2012/cr1294.pdf. ———. 2012d. “Niger: Request for a New Three-Year Arrangement Under the Extended Credit Facility—Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Niger.� IMF Country Report No. 12/109. www.imf.org/external/pubs/ft/scr/2012/cr12109.pdf. ———. 2012e.�Jordan 2012 Article IV Consultation.� IMF Country Report No. 12/119. www.imf.org/external/pubs/ft/scr/2012/cr12119.pdf. ———. 2012f. “Thailand 2012 Article IV Consultation.� IMF Country Report No. 12/124. www.imf.org/external/pubs/ft/scr/2012/cr12124.pdf. ———. 2012g. “Republic of Mozambique: Fourth Review Under the Policy Support Instrument and Request for Modification of Assessment Criteria—Staff Report; Debt Sustainability Analysis; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Mozambique.� IMF Country Report No. 12/148. www.imf.org/external/pubs/ft/scr/2012/ cr12148.pdf. ———. 2012h. “Côte d’Ivoire: Poverty Reduction Strategy Paper—Progress Report.� IMF Country Report No. 12/183. www.imf.org/external/pubs/ft/scr/2012/cr12183.pdf. ———. 2012i. “Angola 2012 Article IV Consultation.� IMF Country Report No. 12/215. www.imf.org/external/pubs/ft/scr/2012/cr12215.pdf. ———. 2012j. “Senegal: Third Review Under the Policy Support Instrument and Request for Modification of Assessment Criteria—Staff Report; Informational Annex; Press Release; and Statement by the Executive Director for Senegal.� IMF Country Report No. 12/227. www.imf.org/external/pubs/ft/scr/2012/cr12227.pdf. ———. 2012k. “Cameroon 2012 Article IV Consultation.� IMF Country Report No. 12/237. www.imf.org/external/pubs/ft/scr/2012/cr12237.pdf. ———. 2012l. “Indonesia 2012 Article IV Consultation.� IMF Country Report No. 12/277. www.imf.org/external/pubs/ft/scr/2012/cr12277.pdf. ———. 2013a. “Energy Subsidy Reform: Lessons and Implications.� Washington DC. www.imf.org/external/np/pp/eng/2013/012813.pdf. ———. 2013b. “Case Studies on Energy Subsidy Reform: Lessons and Implications.� Washington DC. www.imf.org/external/np/pp/eng/2013/012813a.pdf. India. Ministry of Finance. 2012. “Union Budget and Economic Survey.� http://indiabudget.nic.in/. Indian Ocean Newsletter. 2011. “TGV strikes out at oil companies in Madagascar.� June 18. Infos Plus Gabon. 2012. “Gabon: La pénurie avait favorisé la hausse de carburant dans certaines stations d’essence.� April 21. Info.VN. 2012. “Vietnam’s petroleum price calculation method to be revised.� April 27. Interfax. 2009a. “Interfax China Energy Weekly.� February 11. 109 ———. 2009b. “Energy Ministry sees no collusion behind fuel deficit.� August 12. ———. 2011. “CPA to inspect 44 petrochemicals market participants.� July 15. ———. 2012. “Kazakhstan extends ban on petroleum product exports.� December 29. International Oil Daily. 2009. “Russian companies face charges.� February 9. ———. 2011. “Yemen’s refined products sales tumble amid continued unrest.� July 12. ———. 2012a. “Mexico hedges some oil production to ensure minimum price level.� February 2. ———. 2012b. “Russia delays fuel shift.� September 8. ———. 2012c. “Indonesia seeks bigger quota for subsidized fuels.� September 17. IOC (Indian Oil Corporation). 2013. “Indane gas.� https://iocl.com/Products/indanegas.aspx. Iran Economy Review. 2012. “Iran’s daily petrol sales ‘up 3 million liters’.� July 31. ISI Emerging Markets. 2009. “Morocco signs agreement to reduce energy imports.� June 25. Jakarta Globe. 2012a. “SBY announces five new policies to cut subsidized fuel use in Indonesia.� May 20. ———. 2012b. “Indonesia’s gas stove conversion program saved Rp 60 trillion.� July 9. Jordan News Agency. 2012. “Saudi Arabia to provide Jordan with $487mln for development projects.� November 28. JRJ. 2012a. “近年国内��油调价一览.� http://finance.jrj.com.cn/focus/2012cpyjtz4th/. ———. 2012b. “近年国内��油调价一览.� http://finance.jrj.com.cn/focus/2012cpyjtz8th/. Kathmandu Post. 2011. “NOC cuts LPG import.� February 7. ———. 2012. “NOC starts distribution of LPG consumer cards.� April 17. Kenya. Ministry of Energy. 2008. “The Energy (Minimum Operational Stock) Regulations, 2008.� www.erc.go.ke/erc/Regulations/THE%20ENERGY%20(MINIMUM%20OPERATION%20STO CK)%20REGULATIONS,%202008.pdf. ———. National Assembly Official Report. 2009. “Wednesday, 26th August, 2009.� Kojima, Masami. 2009. “Government Response to Oil Price Volatility: Experience of 49 Developing Countries.� Extractive Industries and Development Series #10. Washington DC: World Bank. http://siteresources.worldbank.org/INTOGMC/Resources/10-govt_response-hyperlinked.pdf. ———. 2011. “The Role of Liquefied Petroleum Gas in Reducing Energy Poverty.� Extractive Industries and Development Series #25. Washington DC: World Bank. http://siteresources.worldbank.org/INTOGMC/Resources/LPGReportWeb-Masami1.pdf. ———. 2012. “Oil price risks and pump price adjustments.� World Bank Policy Research Working Paper No. 6227. http://go.worldbank.org/SIM8QA2VI0. Kojima, Masami, and Todd Johnson. 2005. “Potential for Liquid Biofuels for Transport in Developing Countries.� ESMAP Report 312/05. Washington DC: World Bank. www.esmap.org/esmap/sites/esmap.org/files/312-05%20Biofuels%20for_Web_0.pdf. Kojima, Masami, Donald Mitchell, and William Ward. 2007. “Considering Trade Policies for Liquid Biofuels.� ESMAP Special Report 004/07. Washington DC: World Bank. http://siteresources. worldbank.org/INTOGMC/Resources/Considering_trade_policies_for_liquid_biofuels.pdf. 110 Kojima, Masami, William Matthews, and Fred Sexsmith. 2010. “Petroleum Product Markets in Sub- Saharan Africa: Analysis and Assessment of 12 Countries.� http://siteresources.worldbank.org/ INTOGMC/Resources/336099-1158588096604/eifd15_ssa_oil_markets.pdf. Lang, Kerryn, and Peter Wooders. 2012. “India’s fuel subsidies: Policy recommendations for reform.� Policy Brief. Global Subsidies Initiative, International Institute for Sustainable Development. www.iisd.org/gsi/sites/default/files/ffs_india_guide_rev.pdf. Lanka Business Online. 2012. “Sri Lanka to spend US$26mn on fishery fuel subsidies.� February 21. Lanka News. 2012. “Reduce electricity bill and get free electricity for a month.� April 2. Lao State Fuel Company. 2012. “Price Oil.� http://laostatefuel.com. Malaysia Digest. 2012. “Govt to ban incandescent bulbs by 2014.� October 16. Malaysia. Ministry of Domestic Trade, Cooperatives, and Consumerism. 2011. “Petroleum.� www.kpdnkk.gov.my/c/document_library/get_file?uuid=ec21f9fd-fe94-4a67-8527- a11e0a53646b&groupId=10137. ———. 2012a. “Government Subsidies for Consumer Goods.� www.kpdnkk.gov.my/c/ document_library/get_file?uuid=cf6a7d46-56b6-4256-8638-3733d94d20ee&groupId=12502. ———. 2012b. “Types of vehicles eligible for subsidy.� www.kpdnkk.gov.my/en/web/guest/peniaga/ pengurusan-ind-petroleum/disel-bersubsidi-fleetcard/jenis-kenderaan. Market News International. 2009. “China govt: State firms warn banks on oil derivatives.� September 7. Mena Report. 2011. “Iraq, Jordan: Jordan to import heavy oil from Iraq.� August 2. MERA (Malawi Energy Regulatory Authority). 2010. “Rehabilitation of fuel storage facilities underway.� Energy Issue 1(1): 1–2. www.meramalawi.mw/documents/newsletter_volume_1_issue_1.pdf. Meyler, Aidan. 2009. “The pass through of oil prices into euro area consumer liquid fuel prices in an environment of high and volatile oil prices.� Energy Economics 31: 867–881. doi: 0.1016/j.eneco.2009.07.002. Mist News. 2012. “The announced EGP50bn addendum to Egypt’s FY12/13 budget to include EGP30bn for the Petroleum Authority for petroleum subsidies.� December 10. ———. 2013. “Egypt’s Ministry of Trade and Industry will increase mazut prices for the cement and ceramics industries.� January 20. Montaq. 2012. “Argentina: Regulation of the new hydrocarbons sovereignty regime.� August 7. Morocco. Caisse de Compensation. 2012. “Statistiques consummation et subventions par produit.� www.cdc.gov.ma/sites/default/files/upload/STATISTIQUES%20%20CONSOMMATION%20E T%20SUBVENTIONS%20%20PAR%20PRODUIT.docx NamPower. 2007. “Distribution of CFLs – Announcement.� www.nampower.com.na/save/cfl/docs/Erongo.pdf. Nation (Bangladesh). 2013. “Fuel import threatened.� February 15. Nation (Thailand). 2011. “Free electricity bill may hurt energy efficiency scheme.� January 31. Nefte Compass. 2011. “Kazakhs pump up retail prices.� August 5. New Nation. 2011. “Higher transport fares blamed for commodity price hike.� October 2. Nigeria. Federal Government. 2011. “Subsidy Reinvestment and Empowerment Program (SURE √ Program).� http://www.nigeriafirst.org/artman/uploads/sure.pdf. 111 ———. House of Representatives. 2012. “Report of the ad-hoc committee to verify and determine the actual subsidy requirements and monitor the implementation of the subsidy regime in Nigeria.� www.letemps.ch/rw/Le_Temps/Quotidien/2012/10/06/Economie/Images/FUEL_SUBSIDY_PRO BE_REPORT.pdf. Oil and Gas Journal. 2012. “2012 Worldwide Refining Survey.� December 3. Payvand News. 2013. “Iran ends fuel subsidies for 1800cc and above cars.� January 20. Pertamina. 2012a. “Frequently asked questions.� http://gasdom.pertamina.com/faq.aspx. ———. 2012b. “Pertamina implements POS system for fuel monitoring at fuel stations.� June 2. Petrobras. 2013. “Fourth Quarter of 2012 Results.� www.investidorpetrobras.com.br/en/financial- results/4q12.htm. PetroCaribe. 2011. “Latin America and the Caribbean received 92,000 barrels per day of crude and products.� www.petrocaribe.org/index.php?tpl=interface.en/design/salaprensa/ readmenu.tpl.html&newsid_obj_id=860&newsid_temas=1. ———. 2012. “Members.� www.petrocaribe.org/index.php?tpl=interface.en/design/participantes/ participantes_principal.html. PETROCI. Undated. “Project pipeline Abidjan-Yamoussoukro-Bouaké.� www.petroci.ci/index.php?numlien=81. Petroleum Intelligence Weekly. 2011a. “Bolivia takes softer line with oil producers.� January 17. ———. 2011b. “Russia’s Plans for Stockpile Still Sketchy.� August 15. Philippine Daily Inquirer. 2012. “Jeepney drivers with fuel smart cards to each get another P2k subsidy.� January 12. Philippine Star. 2009. “High fuel, hedging costs take toll on PAL earnings.� July 21. ———. 2011. “Government shelves fuel subsidy for farmers.� May 25. PIEA (Petroleum Institute of East Africa). “Industry data.� www.petroleum.co.ke/. Platts. 2003. “Philippine retailers to offer diesel discounts to transporters.� September 1. ———. 2009a. “Chile’s ENAP looks to hedges, contracts after $1 bil loss: CEO.� May 19. ———. 2009b. “Malaysia Airlines $198.5 mil in the red for Q1 on hedging loss.� June 12. ———. 2009c. “Suits banned to save power.� September 17. ———. 2009d. “Fuel shortage persists in Nigeria over end of subsidy row.� November 3. ———. 2010. “Two Qantas staff leave Vietnam after jet fuel hedging losses probe.� July 2. ———. 2011a. “Brazil Petrobras imports gasoline in rare move on ethanol shortage.� April 1. ———. 2011b. “Jamaica announces measures to ease impact of high fuel prices.� April 11. ———. 2011c. “Russia to limit gasoline exports through early May: ministry.� April 28. ———. 2011d. “Turkey to investigate Petrol Ofisi for illegal fuel distribution.� May 10. ———. 2011e. “Pakistan suspends 6 oil marketing companies for low stocks.� June 28. ———. 2011f. “Tanzania hikes gasoline prices amid row over fuel shortages.� August 15. ———. 2011g. “Marketers warn on sales of household kerosene as Jet A1 in Nigeria.� December 20. ———. 2011h. “Report: Turkey kills up to 35 smuggling diesel from Iraq.� December 29. 112 ———. 2012a. “Argentina to meet with refiners Wednesday on cutting diesel prices.� January 18. ———. 2012b. “Nigeria’s NNPC says Customs, Navy are holding up fuel imports.� March 6. ———. 2012c. “Russia to decide on H2 fuel discounts for farmers shortly: ministry.� May 29. ———. 2012d. “Thailand cuts LPG price for industrial sector; to revise price monthly.� June 1. ———. 2012e. “Indonesia not able to ‘wipe out’ fuel subsidies, says Pertamina head.� September 7. ———. 2012f. “China may remove more restrictions on oil pricing mechanism: report.� November 14. ———. 2012g. “Pipeline sabotage costs Nigeria $7 billion each year: official.� November 26. ———. 2012h. “Thailand lays out new strategy to cut LPG subsidies, raise prices.� November 29. Platts Oilgram News. 2010a. “Argentina aims to reduce imports with local biodiesel.� April 1. ———. 2010b. “Indonesia LPG conversion hurt by cylinder explosions.� July 28. ———. 2012a. “Thailand set for multiple hikes in CNG price in 2012.� January 3. ———. 2012b. “Argentina tells refiners to cut wholesale diesel prices.� January 30. ———. 2012c. “China’s Sinopec posts 2% rise in 2011 profit.� March 27. ———. 2013. “Indonesia’s 2013 subsidized fuel use may top quota.� January 2. Platts Oilgram Price Report. 2010. “Brazil to phase out sugar investment to boost ethanol.� June 23. Plus News Pakistan. 2010. “PAC takes notice of fuel hedging by PIA.� June 18. Portafolio. 2012. “Gobierno busca tapar saldo en rojo en fondo de combustibles.� January 31. PPPRA (Petroleum Products Pricing Regulatory Agency). 2009. “Revised Guidelines for the Administration of the Petroleum Support Fund (PSF).� www.pppra-nigeria.org/psfguidelines.pdf. RCREEE (Regional Center for Renewable Energy and Energy Efficiency). 2010. Various country reports under “Impact Assessment of RE&EE National Regulation.� www.rcreee.org/studies.html. REEEP (Renewable Energy and Energy Efficiency Partnership). “Database: policy and regulation review.� www.reeep.org/9353/policy-database.htm. REN21. 2012. “Renewables 2012 Global Status Report.� www.ren21.net/Portals/97/documents/GSR/GSR2012_low%20res_FINAL.pdf. República. 2012. “NOC finalizes LPG subsidy guidelines.� December 2. Reuters. 2010a. “Bangladesh curbs air conditioner use to save power.� March 30. ———. 2010b. “Yemen raises diesel prices by 13 percent.� June 7. ———. 2010c. “Argentina gov’t allows fuel prices to rise.� December 21. ———. 2011a. “Arbitrator voids Sri Lanka oil hedge deal with Citibank.� August 1. ———. 2011b. “Bangladesh to use deferred payment plan on oil imports.� October 4. ———. 2011c. “Senegal sacks minister as anger over power cuts grows.� October 4. ———. 2011d. “Yemen must raise fuel imports, shortage looms.� November 22. ———. 2012a. “UPDATE 1-Nigeria fuel strike cost economy $1.2 bln - stats bureau.� January 18. ———. 2012b. “Syria raises price for scarce diesel.� May 16. ———. 2012c. “Ghana Tema refinery shuts, no credit to buy crude.� May 24. 113 ———. 2012d. “India’s BPCL Q1 loss widens, adds to oil companies’ woes.� August 10. ———. 2013a. “Egypt to delay fuel subsidy rationing.� February 12. ———. 2013b. “Camioneros colombianos inician huelga por aumento del precio de combustibles.� March 2. ———. 2013c. “Colombian truckers end walkout, pressure still on for Santos.� March 5. ———. 2013d. “Egypt to start trials of fuel rationing scheme in May.� March 5. ———. 2013e. “UPDATE 1-Egypt sacks Misr Petroleum head over fuel shortages.� March 11. RIA Novosti. 2013. “Kazakhstan seeks Russia oil product import cut.� January 30. Saigon Times. 2009. “VN targets reduction of air pollution.� June 19. SAPO Moçambique. 2009. “Governo elimina monopólia na importação de combustiveis.� March 11 Satriana, Sinta. 2009. “Impact Assessment of the 2008 Unconditional Cash Transfer Programme (BLT) in Indonesia.� Master’s thesis for the Maastricht Graduate School of Governance. http://arno.unimaas.nl/show.cgi?fid=15253. Shell. 2010. “Shell FuelSave Report 2010. Fact Sheet. Asia.� www-static.shell.com/static/ products_services/downloads/products_services/shell_fuelsave_report_2010_asia.pdf. ———. 2012. “Target One Million.� www.shell.com/home/content/products_services/on_the_road/fuels/fuel_save_challenge/. SKRIN. 2011. “Russia to be turned into energy-saving landfill.� January 31. ———. 2012. “Russian petrol flows abroad.� March 22. South Africa. Department of Minerals and Energy. 2007. “Biofuels Industrial Strategy of the Republic of South Africa.� www.info.gov.za/view/DownloadFileAction?id=77830. ———. Department of Energy. 2011. “Fuel shortages.� Media statement, December 23. South China Morning Post. 2011. “Beijing grants Air China permission to resume hedging the cost of fuel.� August 30. Sri Lanka News. 2012a. “Bus fares not be increased as bus owner gets full concession directly.� February 13. ———. 2012b. “All government institutions limit their consumption of fuel and electricity as priority.� Official news portal of the government of Sri Lanka. February 22. Sudan Tribune. 2009. “Energy review saves Ethiopia 96m US dollars, says Word Bank.� September 9. Sunday Observer (Sri Lanka). 2012. “CEB energy-saving initiative a success.� April 4. Tanzania Daily News. 2012. “Oil sector hails Muhongo over BPS reports.� August 22. Thai News Service. 2009. “Philippines: DoE tells oil companies to explain price hike.� February 18. ———. 2010a. “Vietnam: PetroVietnam offers efficient bio gasoline E5.� August 2. ———. 2010b. “Thailand: Excise Dept to stem fuel smuggling.� September 7. ———. 2011a. “Govt mulls ways to control diesel price.� February 7. ———. 2011b. “Thailand: Diesel subsidy to end in April.� March 4. ———. 2011c. “Thailand: Thai Oil reduces reliance on crude oil from Middle East.� March 10. ———. 2011d. “Thailand: Oil smuggling rampant in 4 southern provinces.� March 17. 114 ———. 2011e. “Thailand: Diesel tax cut under fire.� April 20. ———. 2011f. “Vietnam: Hanoi adopts power conservation plan.� April 20. ———. 2011g. “Thailand: Prime minister-elect Yingluck vows to end contributions of 3 fuel products to Oil Fund.� July 8. ———. 2011h. “Vietnam: Poor law enforcement slows energy saving.� July 29. ———. 2011i. “Thailand: Government orders drastic reduction in petrol and diesel prices.� August 30. ———. 2011j. “Thailand: Energy Ministry seeks loan to replenish oil fund.� September 20. ———. 2012a. “Thailand: Refiners told to build up oil stocks.� March 12. ———. 2012b. “Thailand: Nod to Bt35-bn energy plan.� March 27. ———. 2013a. “Thailand: Energy Ministry delays LPG price increase.� January 9. ———. 2013b. “Thailand: Retailers’ contribution to Oil Fund from diesel sales reduced.� January 10. ———. 2013c. “Thailand: Local LPG price hike to begin in April.� January 29. Togosite. 2011. “Togo: Increase in oil prices at the pump – The government increases the misery of the Togolese.� July 18. Trade Arabia. 2011. “Total Jordan launches move to cut fuel use.� June 26. Trend News Agency. 2011. “Gasoline prices increase in Tajikistan.� November 22. ———. 2012a. “Cooking gas crisis due to distribution: Petroleum minister.� February 6. ———. 2012b. “Some 3 million tons of fuel smuggled via Iran.� February 21. ———. 2012c. “Kazakhstan needs 360.000 tons of diesel fuel for springtime sowing.� April 17. ———. 2012d. “Iran’s daily petrol sales ‘up 3 million liters’.� July 18. ———. 2013. “Iran starts coding smart fuel cards to curb illegal gasoline trade.� February 5. TuoiTreNews. 2013. “Vietnam maintains fuel prices, 3rd time since Jan.� February 28. UB Post. 2012. “Ministry of Mining announces fuel price will remain the same.� November 9. UNECA (United Nations Economic Commission for Africa). 2012. Progress Towards Sustainable Development in Africa. Addis Ababa: Economic Commission for Africa. http://new.uneca.org/Portals/rio20/documents/cfssd7/3aAfricaRevReport-onSDEN.pdf. UPI (United Press International). 2013. “Iraq oil cut fuels Jordan political unrest.� January 16. Upstream. 2013. “Argentina cuts oil export tax.� January 7. USDA (U.S. Department of Agriculture). 2012a. Various issues of “Biofuel Annual 2012.� http://gain.fas.usda.gov. ———. 2012b. “USDA Agricultural Projections to 2021.� www.ers.usda.gov/publications/oce-usda- agricultural-projections/oce121.aspx. ———. 2013. “Oil Crop Outlook.� www.ers.usda.gov/publications/ocs-oil-crops-outlook.aspx. Valiasindi, Maria. 2012. “Implementing Energy Subsidy Reforms: An Overview of the Key Issues.� Policy Research Working Paper 6122. Washington DC: World Bank. http://elibrary.worldbank.org/content/workingpaper/10.1596/1813-9450-6122. ———. 2013. “Implementing Energy Subsidy Reforms: Evidence from Developing Countries.� https://openknowledge.worldbank.org/handle/10986/11965. 115 Victor, David. 2009. “The Politics of Fossil Fuel Subsidies.� A paper in the series, “Untold billions: fossil-fuel subsidies, their impacts and the path to reform,� by the Global Subsidies Initiative. www.iisd.org/publications/pub.aspx?id=1254. Vientiane Times. 2011. “Consumers set for more pain as fuel prices rise.� April 26. VietBiz24. 2012. “Changes from January 1st, 2012.� January 1. Vietnam News Brief Service. 2011a. “Industry: Vietnam firms save 232,000 TOE from energy-saving projects in 5 years.� June 27. ———. 2011b. “Industry: Vietnam EVN promotes solar water heaters to save energy.� December 30. Wall Street Journal. 2012. “PetroChina Profit Falls on Refining.� March 30. ———. 2012-5-22. “Oil price likely to stay buoyed by marginal costs.� May 22. Walta Information. 2012. “Ministry eyes at regulating corrupt petroleum business.� March 6. WDI (World Development Indicators). 2012. World Bank online database. http://data.worldbank.org/data-catalog/world-development-indicators/wdi-2012. Widjaja, Muliadi. 2009. “An Economic and Social Review on Indonesian Direct Cash Transfer Program to Poor Families Year 2005.� Paper presented at Association for Public Policy Analysis and Management International Conference, “Asian Social Protection in Comparative Perspective,� Singapore, Jan. 7–9, 2009. http://umdcipe.org/conferences/policy_exchanges/conf_papers/Papers/widjaja.pdf. WLPGA (World LP Gas Association). 2012. “Automotive LPG sees continued market growth in 2011.� www.worldlpgas.com/mediaroom/206/85/Automotive LPG-sees-continued-market-growth-in- 2011. World Bank. 2008a. “Refining crude oil – Part 1.� Petroleum Sector Briefing Note No. 10. http://siteresources.worldbank.org/INTOGMC/Resources/cambodia_oil_gas_newsletter_10.pdf. ———. 2008b. “Refining crude oil – Part 2.� Petroleum Sector Briefing Note No. 11. http://siteresources.worldbank.org/INTOGMC/Resources/cambodia_oil_gas_newsletter_11.pdf. ———.2012a. “BLT Temporary Unconditional Cash Transfer: Social Assistance Program and Public Expenditure Review 2.� Jakarta. http://documents.worldbank.org/curated/en/2012/02/15893823/bantuan-langsung-tunai-blt- temporary-unconditional-cash-transfer. ———.2012b. “Food Price Watch August 2012.� http://siteresources.worldbank.org/ EXTPOVERTY/Resources/336991-1311966520397/Food-Price-Watch-August-2012.htm. ———. 2013. “Commodity market.� Price data series at http://go.worldbank.org/QNYZRM5540. World Bank. Undated. “Senegal, Republic of: Lighting Energy Efficiency in Rural Electrification.� http://wbcarbonfinance.org/Router.cfm?Page=Projport&ProjID=41766. Xinhua News Agency. 2011. “China likely to push forward product oil reserve.� December 27. ———.2012a. “China cuts product oil tariff to boost imports.� January 9. ———.2012b. “Mongolia establishes price control council to combat inflation.� January 12. ———.2012c. “Tanzania signs pact to fight piracy with Mozambique and South Africa.� February 8. ———.2012d. “China allocates new subsidies to support spring farming.� March 26. ———. 2012e. “Chinese oil majors H1profits slump on weak economy.� September 17. 116 ———. 2012f. “China moves to phase out incandescent bulbs.� October 17. Yemen Times. 2012. “Fresh fuel shortages, controversy.� January 9. Yépez-García, Rigoberto Ariel and Julie Dana. 2012. Mitigating Vulnerability to High and Volatile Oil Prices: Power Sector Experience in Latin America and the Caribbean. Washington DC: World Bank. http://www- wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2012/06/15/000386194_2012 0615041548/Rendered/PDF/699440PUB0Publ067869B09780821395776.pdf.