Last month, in some strikingly straight talk, a Mideast oil minister publicly outed his region for a strategy it has long used to buy political peace: subsidizing people’s use of fossil fuels.
“What is really destroying us right now is subsidies,” Oman’s oil and gas minister, Mohammed bin Hamad al-Rumhy, told an energy conference in Abu Dhabi. With global energy prices rising, he warned, the Mideast no longer can afford to provide fossil fuel to its people at the bargain-basement rates it traditionally has ensured. “Our cars are getting bigger. Our consumption is getting bigger. And the price is almost free,” he said. “We simply need to raise the price of petrol and electricity.”
The Omani oilman was articulating what’s fast becoming an article of faith among countries that, when it comes to energy policy, can agree on little else: Fossil-fuel subsidies are economically and environmentally untenable and should be slashed. The cast of characters now championing this argument includes the Obama Administration, the International Monetary Fund, the International Energy Agency, the Organization for Economic Cooperation and Development, and the governments of such developing countries as Brazil, China and Iran. According to IMF calculationsissued earlier this year, global fossil-fuel subsidies in 2011 cost $1.9 trillion — fully 2.5% of global gross domestic product — and the biggest single source of subsidies was the United States. Eliminating these subsidies globally, the IMF said, would cut energy-related carbon-dioxide emissions a whopping 13%.