WAS PETROL SUBSIDIZED BEFORE THE RECENT HIKE IN PRICE?

by Mudiame Giwa-Osagie on Thursday, January 5, 2012 at 12:18pm

A recent analysis by Professor Tam David-West concluded that there never was a subsidy of petrol. This is posted below and then a rejoinder by an engineer, Mr Soyode, who claims to have worked under the professor. The essential difference is one of semantics. One of whether the difference should be called "opportunity cost" or "subsidy", in my humble opinion. As far as I am concerned, an oil producer such as we are should sell petrol at a lower price than non producers but if this means wholesale smuggling to neighbouring countries, inability to harness the resources accrued from oil production into much needed areas such as health, education and infrastructures development etc something has to be done. Perhaps a modest discount that makes smuggling unprofitable? A committed and immediate massive investment in mass transit will go a long way in relieving the burden of the price hike. A lower petrol price does disproportionately favour the affluent with their gas-guzzling luxury vehicles. If the removal of "subsidy" is properly implemented it should encourage the private sector to erect more local refineries which will be more efficiently managed. This coupled with effective policing to prevent price-fixing will keep the cost of petrol lower than neighbouring countries. The people's reaction to the price hike is based on a justifiable cynicism towards any govt initiative, not limited to the current administration. This anger is best directed at the corruption in the polity and the preposterously bloated renumerations of our political and govt officials: