Saudi Arabia Subsidies

Saudi Arabia–$60.9 billion in 2011

Diesel and gasoline sold in Saudi Arabia are about 12% and 30% of international reference prices, respectively. Saudis enjoy the second lowest domestic fossil fuel prices in the world, behind only Venezuela. In 2009, the Kingdom spent a total of $32.5 billion on fossil fuel subsidies. In 2010, this figure increased to $43.6 billion. In 2011, it ballooned to $60.9 billion. Of its total subsidy spending in 2011, 76 percent went to subsidizing oil, while 24 percent went to electricity, which is also derived from oil. Riyadh is currently the second highest spender on fossil fuel subsidies in the world. In fact, the Kingdom spent more on fossil fuel subsidies (10.6% of GDP) than on health (about 3% of GDP) and education (about 6% of GDP) combined. Saudi Arabia is the second-leading subsidizer of end-use fossil fuel prices, providing 61% of its $48.6 billion in fossil fuel consumption subsidies to oil, 26% to electricity, and 14% to natural gas in 2015.

Saudi Arabia recently scaled back some fossil fuel consumption subsidies that artificially lowered the price of fuel for its citizens, increasing its country’s gasoline prices by 50 percent. Saudi Arabia’s government also started a policy to reduce fossil fuel subsidies in 2015 when the kingdom raised the price of 95 Octane gasoline from 0.60 to 0.90 riyal. Currently, the government is considering the details of a plan to phase out subsidies for gasoline and jet fuel. This could result in a hike of about 80% for octane-91 grade gasoline to about 1.35 riyals per liter (0.36 cents), one person said on condition of anonymity. The government plans to delay increases in other energy prices until early 2018. The plan would also include a cash handouts transfer program for low and middle-incomes families to help them cope with the impact.

The government wants to make a carefully balanced move as removing energy subsidies is politically sensitive issue for the nationals who are accustomed to low energy prices. Therefore, it seeks to review the impact on economic activities and the burden on its citizens to avoid political backlash. A person with knowledge of the matter stated that gasoline and jet fuel would undergo immediate, one-time increases under the Saudi plan, while the government would raise prices of other fuels gradually between 2018 and 2021.

Learn More

Saudi Arabia fossil fuel subsidies: Understanding the Problem by Fuadi Pitsuwan January 24, 2014

Fossil Fuel Consumption Subsidies, While in Decline, Are Still Pervasive in the Developing World. June 5, 2017

Saudi Arabia studies fuel subsidies reform. October 29, 2015. Economic Intelligence Unit.

Saudis May Raise Domestic Gasoline Prices by 80%. Bloomberg.

Saudi Arabia may raise gasoline prices by 30 pct from July, February 27, 2017. Reuters.