Gasoline Demand, Pricing Policy and Social Welfare in Saudi Arabia

About the ProjectKAPSARC’s projects on energy demand model how factors such as income, prices and energy efficiency influence energy demand in different countries, with a strong focus on Saudi Arabia and the Gulf Cooperation Council. The project’s objective is to quantify the influence of each of these factors and estimate the relative levels of energy efficiency across different sectors of the economy. Our energy demand research also looks at the welfare implications of policies that influence energy demand.Key PointsIn the face of low international oil prices, countries in the Gulf Cooperation Council recently implemented fuel price reform across a number of sectors. Saudi Arabia, for example, announced in December 2015 an increase in the gasoline price. We undertook a welfare analysis in this paper to estimate the net gain in social welfare that resulted from this price increase. Our results show that:Gasoline demand is generally price inelastic in Saudi Arabia, the current lack of alternative transport modes, particularly within cities, being one possible reason. Our preferred econometric estimates suggest that the price elasticity is between -0.09 and -0.15. Therefore, the gasoline price increase is unlikely to dampen domestic demand significantly.The gasoline price increase could potentially result in a net gain in social welfare of as much as SAR 2 billion annually at 2010 prices, which is equivalent to 0.1 percent of the Kingdom’s gross domestic product (GDP) in 2015.These welfare gains do not take into account the external costs of gasoline demand and driving. The gasoline price increase would also offer additional welfare benefits to consumers through reduced greenhouse gas emissions, air pollution, congestion and accidents.The structure of the Saudi labor market and government spending on public employee salaries suggests that the direct loss for consumers due to the price increase would probably be offset by gains for producers (mainly Saudi Aramco) and the government.

关于项目KAPSARC关于能源需求模型的项目探讨了收入、价格和能源效率等因素如何影响不同国家的能源需求，特别是聚焦于沙特阿拉伯和海湾合作委员会。项目的目标是对这些因素各自的影响进行量化，并估计不同经济部门能源效率的相对水平。我们的能源需求研究还分析了影响能源需求政策的福利影响。要点面对国际油价低迷的现状，海湾合作委员会各国近期在多个领域实施了燃料价格改革。例如，沙特阿拉伯于2015年12月宣布提高汽油价格。本文进行了福利分析，以估算由此价格增长导致的社会福利净增。我们的研究结果表明：沙特阿拉伯的汽油需求通常对价格缺乏弹性，当前缺乏替代的交通工具，特别是在城市内部，可能是这一现象的一个可能原因。我们偏好的计量经济学估计表明，价格弹性介于-0.09至-0.15之间。因此，汽油价格的提高不太可能显著抑制国内需求。汽油价格的提高有可能在2010年的价格水平下每年为社会福利带来高达200亿里亚尔的净收益，相当于2015年王国国内生产总值（GDP）的0.1%。这些福利收益未考虑汽油需求及驾驶的外部成本。汽油价格的提高还将通过减少温室气体排放、空气污染、拥堵和事故，为消费者提供额外的福利收益。沙特阿拉伯劳动力市场结构及政府对公务员薪酬的支出表明，消费者因价格上涨而直接遭受的损失可能由生产者（主要是沙特阿美公司）和政府的收益所抵消。