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Accepted Paper:
An exploration of the association between fuel subsidies and fuel riots
Neil McCulloch
(The Policy Practice)
Naomi Hossain
(SOAS University of London)
Davide Natalini
(Anglia Ruskin University)
Patricia Justino
(UNU-WIDER)
Paper short abstract:
When countries fix fuel prices, they create subsidies. When these become unsustainable, subsidy reforms induce large price spikes that frequently cause fuel riots. Net energy exporters and countries with poor governance are more likely to have large fuel subsidies.
Paper long abstract:
Fuel riots are common around the world. Between 2005 and 2018, 41 countries had at least one riot directly associated with popular demand for fuel. We make use of a new international dataset on fuel riots to explore the effects of fuel prices and price regimes on fuel riots. In line with prior expectations, we find that large domestic fuel price shocks are a key driver of riots – as these are often linked to international price shocks. In addition, we report a novel result: fuel riots are closely associated with domestic price regimes. Countries that maintain fixed price regimes – notably net energy exporters – tend to have large fuel subsidies. When such subsidies become unsustainable, domestic price adjustments are large, often leading to riots.