A Brief Political Economy of Energy Subsidies in the Middle East and North Africa

Energy subsidies are among the most pervasive, and most controversial fiscal policy tools in the Middle East and North Africa (MENA). In a region with few functioning social welfare systems, subsidized energy prices continue to form an important social safety net, albeit a highly costly and inefficient one. In the MENA region’s oil and gas producers, low energy prices have also historically formed an important element of an unwritten social contract, where governments extracted their countries’ hydrocarbon riches in return for citizens’ participation in sharing resource rents. While it is clear that energy subsidy reform will not be the only variable at play, its potential socio-economic dividends are important factors enabling some common regional objectives – sustainable fiscal policy, fiscal space to invest in key areas, and a more efficient and equitable distribution of scarce resources – to be achieved, helping to promote a more stable political status quo in the long term. If accommodated by effective mitigation measures, reforming energy subsidies in the MENA region’s middle-income economies could be a powerful tool for governments – addressing those very profound socio-economic grievances that have contributed to the outbreak of political protest. In this paper, we look at some of the MENA region’s potential avenues into reform. While the past has demonstrated the political difficulty of reforming energy prices, recent experience also shows that the reform of energy subsidies can be done, if accompanied by a set of enabling factors.

By: Bassam Fattouh , Laura El-Katiri

Latest Tweets from @OxfordEnergy

  • A new OIES study reviewed by Interfax: Panama Canal is likely to reach its transit capacity for LNG tankers in the… https://t.co/cglkcnV87Z

    April 19th

  • India's plans to establish a gas trading hub are a good step to try and commercialise the use of gas in the economy… https://t.co/hB0FxkXwAv

    April 19th

  • New issue of Oxford Energy Forum discusses the disruptive impact of interactions between vehicle automation, electr… https://t.co/tJdwhva2xq

    April 18th

Sign up for our Newsletter

Register your email address here and we will send you notification of new publications, comment, articles etc. automatically.