Sectoral and Economy-Wide Effects of Domestic Energy Price Reforms in Saudi Arabia

Abstract

Price reforms without additional investments in the non-energy sector may not be beneficial to households unless they receive cash transfers or some other monetary compensation. There is a trade-off between revenue-recycling policies that directly support household income (i.e., cash transfers), and policies that contribute to increased activity in the non-energy sector as a result of higher investment. Full price-deregulation would reduce Saudi Arabia's energy-related carbon dioxide (CO2) emissions by around one third by 2030, compared with our baseline. Key Points price reforms reduce domestic consumption and, therefore, increase oil exports. International oil prices have the potential to adjust to increases in market supply and, in turn, impact Saudi Arabia's oil revenues.

Policies to Nationalize the Private Sector Labor Force in a Matching Model with Public Jobs and Quotas

“…Prior studies have constructed models to assess the consequences of price deregulation on the energy system (Matar et al 2015) and the broader macroeconomic consequences (Blazquez, Hunt, and Manzano 2017;Soummane, Ghersi, and Lefevre 2019;Durand-Lasserve et al 2020). These studies propose various compensation mechanisms to mitigate the adverse effects of increasing domestic fuel prices on household incomes and industrial competitiveness.…”

“…For this simulation, we use the results of the KAPSARC Energy Model -General Equilibrium developed by Durand-Lasserve et al (2020). This model calculates the fiscal space created by an energy price reform, and we consider a reform that deregulates all domestic energy prices.…”