Why Is Oil Globally Subsidized ?

http://bit.ly/7XwAG


One of the principle reasons why oil is a globally subsidized product, is the clout of the oil producers and traders in business. It is not that other energy sources like coal,solar energy,wind energy and others are not subsidized.Energy basically is a subsidized commodity, for few nations in the world are able to confront the domestic pricing of energy and the realtime effects of high energy consumption.

Though subsidies granted through a myraid of schemes from direct tax concessions to indirect low interest borrowings cannot be quantified exactly it is understood that subsidies to the oil industry in the US is over $40 billion and in China and Europe around $20 billion each. Even smaller countries like Indonesia and Malaysia have subsidies nearing $ 15 billion, while India has the figure between $7 billion to $8 billion before the Govt. in a bold move decided to do away with the subsidy on petrol (gasoline) and diesel.

President Obama has called for withdrawl of $36 billion subsidies given in form of tax benefits to the U.S. oil industry like last year, but with the paper thin majority at the senate, it is very unlikely such a bill can be passed before the November elections. In Europe the oil subsidies are given in form of tax breaks as well as free carbon credits. In China the pricing of gasoline is around three fourth the pricing of oil in India and is based on a 22 day moving average of Brent, Dubai, and Cinta while in Indonesia and Malaysia have prices around half of India.

Subsidizing oil is counterproductive as it not only adversly affects budgetary deficits, it also promotes higher consumption of oil and causes higher global warming. In countries such as India where oil consumption is price sensitive it is a highly effective methodology to curtail consumption and thereby emissions. So why are other nations not following suit. In US as well as in Europe the legislation changes are cumbersome in face of the very influential oil lobby, while in Asia it is the pressure from consumers that keep the prioces down. No wonder the consumption of oil continues unabated and there is no change in the rise of global warming.