Ecuador wants to phase out its high fuel subsidies
Ecuador’s government is trying to find a way out of the unsustainable fuel subsidies it currently pays to keep gasoline, cooking gas and diesel at levels that the population considers affordable.
Ecuador currently spends $3.8 billion subsidizing fuel (gasoline, diesel, cooking gas).
During his weekend broadcast, President Rafael Correa said that the subsidies benefit the wealthy more than they benefit low income people.
To correct the problem, the government is studying the implementation of a fuel debit card, by 2015, that would be used to assign fuel quotas to vehicle owners. Correa also mentioned the idea of phasing out the propane stoves used almost exclusively by Ecuadorians for cooking, and replace them with electric stoves the government will help provide.
Ecuadorian families spend about $2 on a 20lb tank of cooking gas, which will last 1-3 months, depending on usage, before they need to be refilled.
Gasoline is also subsidized. Correa said that for a wealthy person with a gas-guzzling SUV, that subsidy can mean a yearly benefit of $1,000. A poor citizen who doesn’t have a vehicle gets an indirect benefit of about $60 a year, Correa said.
Correa proposed the magnetic debit card that would allot a quota of subsidized fuel per person. After they exhaust their quota, a person must buy gas at international prices.
Subsidizing cooking gas costs Ecuador $700 million a year, Correa said. As of 2016, Correa says, Ecuadorians will have to start paying the full price of cooking gas. By 2016, he says, Ecuador will have eight new hydroelectric generating stations, and cooking with electricity will be a real alternative.
Officially, the 15 kg gas tank costs $1,60 in Ecuador, according to Ecuador’s hydrocarbons regulating agency. In neighbouring Colombia, the same tank costs $26. In Peru: $20
Ecuador started subsidizing its puel sources in 2003 after international oil prices jumped, creating volatility in the local market. Since then, the amount of the general budget going towards paying for the fuel subsidies has steadily risen