Why Global Fuel Prices Will Spark the Next Revolutions
While the demonstrators that have mobbed the streets of Amman for two weeks now are demanding the overthrown of King Abdullah — a criminal offense in Jordan — it’s not the demand for democracy that sparked their protests. Instead, thousands of Jordanians have been spurred to act by a more basic issue: the rising price of gas after the government withdrew its subsidies.
Jordanians are hardly alone in their anger. Governments across the world are attempting to wean their citizens off subsidized fossil fuels —a critical issue which environmentalists say is a big contributor to the output of carbon gases that contribute to global warming, and which have even more immediately burdened public finances the world over by an estimated total of $523 billion last year — a 30% increase over the previous year. “In a lot of emerging and developing countries you see fuel subsidies, where the government is picking up the tab,” says Helen Mountford, deputy director of the environmental directorate for the Organization of Economic Cooperation and Development, or OECD, in Paris, which represents the world’s biggest economies. “In many cases it has been put in place to help support the poor.”
For decades, the price paid at the gas pump for most of the world’s drivers has had little relationship to the true cost of fuel. Massive government subsidies have allowed millions of consumers to pay a token amount, in some places mere pennies per gallon. Jordanians, as it turns out, pay about $3.33 a gallon for gas, but in oil-rich Venezuela, the price for premium gas is just 9 cents a gallon, while in Saudi Arabia it is 61 cents, according to Bloomberg rankings. Such subsidies have long been a key prop in the political survival strategies of authoritarian governments, while even in more democratic countries fuel subsidies have become an untouchable entitlement.
But fuel subsidies are becoming increasingly untenable as governments face mounting budget deficits in a weakening global economy, amid oil prices that have remained above $100 a barrel since 2010. Jordan lifted subsidies in order to secure a $2 billion IMF loan in the face of a $3.2 billion shortfall in a budget that devotes $2.3 billion annually to subsidizing fuel and other basics.