Tuesday, September 06, 2005

Fuel Subsidy

Poor countries face a dilemma with rising oil prices.

If the government keeps the domestic price low, they bear the cost of the subsidy. Their people can take advantage of the subsidised price and buy more and make a profit from re-selling the fuel.

If they adjust the price to reflect the world market price, the ordinary people cannot afford the higher price.

What should they do?
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2 comments:

Tan Kin Lian said...

I have a solution. It is not perfect, but perhaps workable under the circumstances.

Issue a fuel voucher to the poor family, and to the people who need to use fuel for their daily business, eg transport operators.

This entitles the holder to buy a limited quantity at a subsidised price.

September 07, 2005 9:37 AM
Mockingbird said...

Hi Mr Tan,

Have you noticed that Shell has been offering 10% discount on all its petrols, whereas all its competitors have only been offering a miserable 6%?

September 15, 2005 5:54 PM

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