Domestic Petroleum Product Prices and Subsidies; Recent Developments and Reform Strategies

The paper reviews recent developments in the pass-through of international to domestic petroleum product prices, in the different fuel pricing regimes, and in fuel subsidies in a range of emerging market and developing economies. The main finding of the paper is the limited price pass-through in many countries and the consequent increase in fuel subsidies. The paper proposes that key elements of a successful strategy to contain subsidies should comprise: making subsidies explicit; making pricing mechanisms more robust; combining reductions in subsidies with measures to protect the poorest; using the resulting savings well, and transparency and consultation.