Policy lessons from the execution of fuel dual-pricing: Insights for fuel-subsidizing economies

This paper for the first time systematically examines fuel dual-pricing policy (FDPP) in the context of developing countries. Governments in most of these countries pay a heavy price for subsidizing fossil fuels and thus, most of these countries suffer from adverse economic, social and environmental consequences. In these circumstances, governments cannot take the risk of social unrest and economic shock by quickly removing fuel subsidies. FDPP can be addressed as a transitional policy to liberalize fuel prices. However, the literature fails miserably to address the dynamics of FDPP execution due to the lack of valid empirical data. Accurate analysis making use of long-term valid data could shed light on this dilemma. Through a scenario planning approach, this study evaluates the positive and negative impacts of executing or terminating FDPP. In general, it is concluded that, despite difficulties in formulation and implementation, FDPP has the potential for several positive economic and environmental effects through which fuel-subsidizing economies can employ FDPP as a transition pathway to liberalizing fuel prices.