Oil & Gas Subsidies Costing Saudi 11% Of Gdp, Says IMF

The implicit cost of subsidized petroleum products and natural gas prices in Saudi Arabia was $83bn or 11.1% of GDP in 2014, the IMF says in a recent paper setting out its arguments for the need for energy price reform in the kingdom.

However, taking into account the decline in energy prices since 2014, the IMF projects that the implicit cost will fall to an estimated $65.9bn or 10.2% of GDP this year.

The IMF calculates this cost by multiplying the price gap between Saudi and US domestic prices (with the latter used as a proxy for international prices) by the quantity consumed. The IMF says it has adopted this methodology because the Saudi budget does not give an explicit cost of low energy prices. The agency adds that 86% of this cost is accounted for by petroleum products, dominated by diesel with a 39.4% share and gasoline with 22.1%. Natural gas accounts for the remaining 14% (see table). (CONTINUED - 610 WORDS)


table Implied Cost* To Saudi Arabia Of Energy Subsidies, 2014