First the Fuel Subsidies Come Off. Then the Wheels.

(Photo by

“Damn! I can’t afford this! I just filled up with gas!” (Photo by

A funny thing happens when countries can no longer afford massive subsidies to keep down the cost to consumers of fossil fuels: the governments stop paying, and their country stops dead, or changes governments. Cheap fuel was once a perk for anyone who happened to live in an oil-rich country. But the perk has become an entitlement, and woe betide the country who, upon discovering it is not in fact oil rich anymore, tries to balance the books by charging its people the actual cost of fuel.

Nigeria is Africa’s largest oil exporter, and third largest economy, yet it has desperate needs for investment in roads, power generation and water systems. The two principal reasons these needs have been unmet are generations of rampant government corruption, and the roughly $8 billion a year in fuel subsidies. In March, a new government won election on promises to stop the corruption and the subsidies.

Fuel importers (Nigeria exports crude but does not have the refinery capacity to meet its domestic needs for fuels), fearful that they were going to lose a lot of business, stopped delivering product until the government paid its past due bills of nearly a billion dollars. The country has come to a standstill, with cars, trucks, buses and airplanes idled, electricity scarce, prices rising and unrest spreading.

It’s a repeat of what happened in 2012, when the country changed governments, and the outgoing government stopped the fuel subsidies. Chaos ensued, a massive strike shut down the country. And it stayed shut down until the subsidies were partially restored.

The iron jaws of this conundrum are closing on oil producers all over the world, from Saudi Arabia to Venezuela. Using oil profits to subsidize domestic consumption has become increasingly costly, because the subsidies inflate consumption while production of oil remains flat or declines. The problem was bad and getting worse long before oil prices tanked last year; now it has become a mortal threat to oil producing nations everywhere.

Iran, which like Nigeria has tried before to end its fuel subsidies only to back down in the face of immediate public unrest, last week announced it would try again. It raised fuel prices by 40%, hoping to raise nearly two billion dollars a year without sending people into the streets.

During the past few years several countries have faced first financial, then social stress as they tried to come to grips with the implacable problem. They include Malaysia, Indonesia, Sudan, India, Brazil, Yemen, and others.

The problem is not limited to those countries that pay overt subsidies to reduce pump prices. The United States, through tax breaks and production subsidies, gives $37.5 billion a year to fossil fuel companies (including coal and gas), without apparently affecting consumer prices. (see “Money for Nothing: The Case for Eliminating US Fossil Fuel Subsidies.”) While the US is not being squeezed by simultaneously declining oil revenues and rising subsidy demands, it is handing over to private, highly profitable corporations billions of dollars that could be used, for example, to shore up the country’s decaying bridges.

While the world pretends to be awash in surplus oil at the moment, it really isn’t, world crude oil production has been flat or declining since 2005. In the coming years the noose of declining supplies will tighten first and most drastically on those countries that in effect paid their people to burn more fuel faster when it was summertime, and the living was easy.


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9 Responses to First the Fuel Subsidies Come Off. Then the Wheels.

  1. Mike Kay says:

    It is a funny world. Looking around, with most conversations firmly anchored on such critical matters as the price of fish, I am reminded of a line in the Lego movie, where president business tells the people to ignore that huge black monstrosity floating above them, instead ask themselves the critical question of -WHO WANTS A TACO!!!!!
    The corruption, the orchestration, the lies which are fundamental to all aspects of this society are not going to shield any of us from the developing crisis. What they will do is make many of us more stupefied-if that is possible-as reality bites.
    For the record, I have no lifeboat, no plan B, no chance at hurdling this oncoming wave. Even so, I am convinced that the entire system has for so long launched an endless array of pernicious lies, distortions, and idiotic claims a’ la’ president business, that it is little capable of anything else.
    Truth is a premium aspect of the human condition, especially since it is so sparingly available. Thanx Mr. L., for this dose of truth, sir.

    • colinc says:

      Mike, you start with…

      It is a funny world.

      I thank you as that reminded me, as similar turns on the phrase, of the time when I first began playing golf in the mid-90s. I was in my mid-40s then and was playing with an “old timer,” a guy older than I am now and whose devotion to the game then exceeded the span of my current involvement. I hit a “bad” approach shot, promptly exhorting expletives at myself, when, lo and behold, the ball dropped into the cup for an eagle two. The old timer said, “It’s a funny game.” I then thought it necessary, as I still do when hearing a similar statement, such as yours, “Then WHY don’t I hear more people laughing?” Now, I ALWAYS laugh, at least at my own faux pas as well as the absurdities asserted by others. Like you, I have no “lifeboats” available and, if I did, I’m none too sure that I would “want” them. However, make no mistake, well before the end of this century, this world will have a GREATLY reduced “human,” whatever the fuck that means, population. In other words, if the Toba eruption were “human,” it would be jealous of the imminent bottle-neck, of which I am relatively sure you are aware. Alas, you are in error stating that “[t]ruth is a premium of the human condition….” My experience with “truth” only serves to exhibit such as a bigger detriment to relationships, both personal and vocational, than a dropped anchor from the USS Enterprise would be to the forward movement of a kayak. This “society,” this “culture,” really can not handle any “truth” lest it shrivel up and die of its own ignorance which it seems destined to do, anyway. As I’ve stated far too many times, “the problem” is NOT too many people, it IS too many STUPID people!

      • Mike Kay says:

        Appreciate your thoughtful response.
        I do find myself laughing at the condition of the human world, but it is rarely a laugh of genuine mirth. Perhaps it is more of a coping mechanism-laughing at the suicidal absurdities of the human condition is a way of making them less ominous.
        Indeed, humanity has been loosing intelligence steadily since the middle of the 19th century, and the average politician today is a flat out dumbass who mindlessly spews forth whatever they are told by their masters. Their masters aren’t any smarter, and they prove their abject stupidity by the actions of their minions, which puts us in the place of having proven morons and deranged lunatics as leaders. I don’t see much chance here for a positive outcome.
        It does seem certain that modern human society has outstripped the ability of the planet to support it. This does not stop the stupid people from reproducing to the fullest extent of their capability. Doubtless, they too will be struck by the cold reality of diminishing capacity, and all those additional mouths to feed will become an untenable burden. This type of circumstance has happened before, and we all know that history rhymes.
        Truth is the only elixir to an untenable condition. The only cure for confusion is truth. The only measurement worth its salt is the truth. Such is my view.
        If you are curious, my position on the deck of the Titanic is that nondescript room somewhat aft of the 4th funnel, the place where nobodies and the forgotten gather to witness the last of the lifeboats launch with their precious cargo. Perhaps you could join me for a brandy?
        Best wishes.

        • colinc says:

          I’m sure I would love to join you in your cabin, or wherever, for a snifter of brandy while we amuse ourselves with poignant and lucid repartee regarding the frantic actions of the myriad dumb-asses scurrying about! :) I’ve found your perspective and comments regarding “truth,” both here and on NBL, quite similar to my own. Unlike Nicholson’s character in “A Few Good Men,” which I’ve never watched in its entirety, it’s not so much that people “can’t handle the truth” as most people wouldn’t recognize “truth” if it kicked them in the groin! Moreover, any and every truth appears to be anathema to the deluded worlds that exist solely between their own two ears. Personally, I think the pollutants that have been poisoning the atmosphere, water and soil for many, many decades has had a [not so?] subtle effect of rendering the preponderance of the global “human” population stark, raving, bat-shit insane and few, if any, have noticed. If you, or anyone, wish I can be “found” as golfwalker via hotmail.

          • Tom says:

            “i’ll bring the bridge mix!” [Johnny from Airplane]

            Count me in colin and mike – there ain’t no gettin’ off this ride!

            You two are among the commenters i seek out and read. colin – i’d love to get in touch via e-mail if that’s okay. [hope i’m not making this into quai-Farcebook again in the eyes of our generous host; it isn’t my intention, just communication].

          • colinc says:

            Tom(s) and, again, anyone, please, feel free at your discretion and convenience.

  2. Rob Rhodes says:

    Good essay but one remark. Would it not be a better idea to continue letting the highway system, bridges and all, decay and start rebuilding rail and canal systems. Canals seem unthinkable still but were an important part of early industry. For now it could be declared they’re for tourism ’cause everything is gonna be okay.

  3. Tom says:

    Nice job on this Mr. Lewis – another warning to which TPTB are paying no heed.

    The follow-up, since everything is connected, is that the countries you named will effect all the countries with which THEY do business and the dominoes start to fall. This may even be the key to triggering the global bank freeze and currency collapse that’s waiting in the wings.

    One thing’s for sure – it ain’t gettin’ any better, anytime soon.

  4. Denis Frith says:

    These anthropocentric discussions are interesting because the touch on the decisions made by people. However, the reality that people will have to cope with is that technological systems have irreversibly used up limited natural resources to instal, operate and maintain a vast aging infrastructure that provides services people have become very dependent on. What decisions will people make when the fuel for transport, electricity, potable water, sewerage systems and a host of other goods and services become less available as roads crumble, skyscrapers become uninhabitable while storms, floods and droughts are nature’s reaction to the misuse of fossil fuels.