The price Arab consumers pay at the pump is drastically lower than in most other developing and emerging economies, according to data from the US-based consultancy AIRINC. While this is in part due to the rich resources deep below the lands and waters of many Arab states, it is mostly due to government manipulation.
Click here or on the graph below to see our interactive guide to petroleum prices in the Arab world and other developing economies.
This manipulation takes at least two forms: subsidies and price-fixing. In the hydrocarbon-rich Gulf, autocratic governments have effectively offered to provide basic services at no or little cost in exchange for allowing them to control the country. Subsidized gasoline is a key part of this agreement.
However, these artificially low prices are leading to a question of future sustainability. The conundrum is summed up in a paper from the University of Cambridge’s Electricity Policy Working Group. Low prices lead to greater consumption, which increases the cost of government subsidies, which means governments must export more — thus taking energy resources away from a growing domestic market.
In countries without massive energy resources such as Jordan and Egypt the problem is far more acute. Last year, riots broke out when Jordan’s government announced a price hike. Of the Arab nations surveyed, the dearest gasoline was found in Lebanon, which does not subsidize fuel but still sets prices.
For many, the price at the pump is a daily reminder of the cost of living. However, in the Arab world it should also serve as a reminder of market interference and the price citizens are expected to pay for their government.
