IEA chief: Stop oil subsidies from meddling with fuel prices

By RTCC Staff

Van der Hoeven says protecting consumers from high oil prices is not always the right thing to do. (Source: Wikimedia/Rama)

High oil prices must not be offset by government money, the head of the International Energy Agency (IEA) has told a conference in Kuwait.

Maria van der Hoeven said that governments had to review how they interact with the energy industry, including their climate change policies.

“Governments also need to think carefully about price subsidies and taxes. End-user subsidies, while carrying noble social objectives, are often economically inefficient and distort price signals to consumers,” said the IEA executive director.

“The public will not respond to triple digit international prices if it is paying only a fraction of that at the pump,” she said.

Rising oil prices, largely due to increasing instability in the Middle East, can encourage consumers to change behaviour, making fewer car journeys and increasing energy efficiency at home.

However, in developing countries, spikes in cost of oil can price some out of the market.

With many communities in the developing world not connected to an electricity grid, they frequently rely on oil for generators, cook stoves and kerosene lighting.

Van der Hoeven also called for governments to review environmental policies relating to energy to ensure they are “predictable, practical, economic and internationally coordinated”.

A number of figures have recently called for the removal of all fossil fuel subsidies including President Obama and the EU Climate Change Commissioner Connie Hedegaard.

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