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End of Energy Subsidies: Pro & Con
Posted by Yogesh on Friday, 23 May, 2008
There are signs that emerging-market governments who provide gasoline and other energy subsidies to their citizens are under intense pressure to lower those subsidies, and this is causing some trepidation among stock market bulls.
Consider:
–Indonesia has announced they are reducing subsidies on gasoline, in an effort to reduce their budget gap. This may increase fuel prices by 28 percent. Protests have already broken out;
–Taiwan has said electricity prices will be going up for the first time since 2006, and will allow local oil refiners to raise prices;
–Malaysia has said it would review its existing fuel subsidy program “soon;”
So far, we have not seen price hikes in China and India, both of whom are obviously worried about social unrest.
However:
–In China, rumors that China might consider lowering its considerable fuel subsidy program have generated several Chinese newspaper reports, where officials have denied that the government is considering lowering subsidies.
–In India, a major oil refiner, Bharat Petroleum Corporation Limited (BPCL) has announced that they are rationing gasoline to all of its stations, because the government has refused to allow them to raise prices. Source CNBC.com
