Governments Try to Fight High Fuel Prices with Subsidies, Tax Cuts

From Far East to South America, governments have been announcing fuel subsidies to ease the pressure on consumers from the impact of skyrocketing energy prices after oil soared to 14 year highs.

Japanese industry ministry issued a temporary emergency measure in January to ease wholesale prices and tried to mitigate the rise in gasoline prices by giving subsidies of 3.4 yen per liter to distributors. Since its first application on Jan. 27, the subsidy has risen four times to finally hit the upper limit of 25 yen per liter.

The Japanese government considers extending the subsidy, which was set to expire at the end of this month.

France announced plans on Jan. 25 for a further cut of 10% in tax on transport costs for commuters.

Macron promised measures to help households deal with high prices a month ahead of the presidential election. French government has already spent €20 billion a year to moderate energy costs.

In addition, France’s oil giant TotalEnergies will offer a discount of 10 cents per liter at domestic gas stations.

South Korea has been another country that cut taxes on fuels. The measure that took effect on Nov. 12 was extended until the of July. The government cut taxes of 164 won, 116 won and 40 won per liter for gasoline, diesel and LPG respectively.

The government had announced in October that taxes on key oil products would be slashed by a fifth and the 2% LNG tariffs would be temporarily removed.

Malaysia’s oil subsidies may more than double this year to reach 28 billion ringgit ($6.67 billion) if oil prices remain high, taking its monthly bill to 2.5 billion ringgit if the price keeps above $100 a barrel.

Malaysian government’s January expenditure on gasoline, diesel and LPG amounted to 2 billion ringgit, increasing tenfold on the year. Last year, the government’s petroleum subsidies were 11 billion ringgit.

Brazil’s Senate passed two legislations last week to cut fuel price hikes with subsidies and tax exemptions. While it’s good news for Petrobras, the state oil company, it’s bad news for the states, which will have reduced tax revenues.

The first bill allows the government to compensate fuel distributors if international prices go above a certain range for domestic prices.

The second bill simplifies measures on calculation of the state tax regarding prices of gasoline, ethanol, diesel, biodiesel and LPG.

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