Reforming Energy Subsidy in Kuwait: Maximizing Net Benefits and Equity Complying

Abstract

The net benefits and public acceptance for a proposed reform to the current subsidization of energy in the State of Kuwait was investigated in this study. The proposed subsidization suggests that the government pays the consumers the subsidization cost in advance and in exchange for raising the subsidized tariffs to full price. The consumption will likely be reduced by a rate equals the over consumption due to the current subsidized tariffs in relative to the income. The net benefits is expected to be maximized and shifted to a pseudo-equilibrium point where both the governments and the consumers will be better off financially. The public acceptance toward the proposed strategy was examined using 274 voluntarily one-to-one interviews for gasoline and 121 for electricity and water. Also, a utilities meters reading program was conducted on 90 houses out of the 121 interviews for utilities. The interviews for gasoline and utilities indicated 57% and 66% of the respondents see no equity in the current subsidization, 55% and 80% admitted to overuse, and 11% and 21% averages of the over consumptions, and 67% and 66% of the respondents were willing to adopt the new strategy. The consumer is expected to save 912 USD/year from gasoline, and 8,198 USD/year from utilities. The estimated net benefits is 5,841 million USD annually with 62% attributed to utilities benefits and 38% to gasoline benefits.