JUNE 2 — There is a peculiar kind of madness in the world. We are talking about fuel subsidies. In capitals across the world — from Jakarta to Abuja, New Delhi to Brasília — policymakers are trapped in a ritual as predictable as it is destructive. Every time global oil prices spike, the same debate erupts. And every time, we settle for the easy lie: that subsidising fuel is an act of mercy.

Let us be clear of the fact that the good, the bad, and the ugly of this policy are not three equal columns on a ledger. They are a cascade of failure, and we are already halfway down the cliff. Yes, on paper, fuel subsidies help the poor. A fisherman in a remote village needs diesel. A single mother driving a battered rickshaw needs gasoline. When the price at the pump is artificially low, their survival costs less. In the short term, that is a lifeline. But here is the question we are too polite to ask: Does the lifeline actually reach them?

Evidence from dozens of countries says no. Most fuel subsidies are regressive. The richest 20 per cent of households consume five to ten times more fuel than the poorest 20 per cent. Why? Because the poor don’t own cars. They take buses. They walk. When you lower the price of gasoline, you are not helping the widow in a slum — you are helping the executive in an SUV. So, the “good” is largely a myth. A comforting fable we repeat so we don’t have to face the harder truth.

Now let’s talk about the money. Governments love to announce fuel subsidies as if they cost nothing. But every dollar spent keeping prices artificially low is a dollar not spent on hospitals, schools, roads, or vaccines. In 2022, when global energy prices went berserk, some countries spent more on fuel subsidies than on public health. Think about that. We chose to subsidise the convenience of driving over the survival of the sick.

And here is the kicker: the bill is infinite. Because the subsidy is tied to global prices, the government has no control. When oil rises, the subsidy explodes. We end up paying foreign oil producers and domestic rich consumers at the same time — with borrowed money, no less. That is not fiscal policy. That is a suicide pact with a credit card.

But the bad is merely expensive. The ugly is existential. First, smuggling. In countries where fuel is heavily subsidised and neighbours pay market rates, a black market thrives overnight. Subsidised diesel doesn’t end up in tractors — it ends up in tankers headed across the border, sold for triple the price. The result? Your taxes are literally fuelling another country’s economy. Call it what it is: subsidy tourism for criminals. Second, overconsumption. When fuel is cheap, we use more of it. We idle engines. We take unnecessary trips. We buy gas-guzzlers. Basic economics — demand responds to price — does not suspend itself for good intentions. And in an era of climate collapse, encouraging overuse of fossil fuels is not just stupid. It is immoral.

Every litre of subsidised fuel burned sends carbon into a sky that is already choking. The poorest people on Earth — the same ones the subsidy claims to protect — are the most vulnerable to floods, droughts, and heatwaves. So in the long run, the policy doesn’t just fail the poor economically. It kills them climatically. I am not naive. Removing a fuel subsidy is political suicide. The people who benefit most — the rich and the middle class — will scream loudest. They will call it a betrayal of the poor, even as they fill their own tanks.

But we have better options. Smart cash transfers, for example. Take the money wasted on blanket fuel subsidies and give it directly to low-income families as cash or food vouchers. That way, the poor get help — and the rich lose their discount at the pump. Public transit subsidies, electric bus fleets, targeted LPG vouchers for rural households. There are dozens of proven alternatives. The only thing we lack is courage.

Fuel subsidy is a policy designed by cowards and defended by lies. It pretends to help the poor while bleeding the treasury, enriching the rich, rewarding smugglers, and cooking the planet. It is a rare thing: a policy that is economically foolish, socially unjust, and environmentally catastrophic — all at once. The next time someone tells you we must keep fuel cheap to protect the vulnerable, ask them: How much of that subsidy went into your own car last week? We can do better. We must do better. Before the ugly consumes us all.

* Professor Datuk Dr Ahmad Ibrahim is affiliated with the Tan Sri Omar Centre for STI Policy Studies at UCSI University and is an Adjunct Professor at the Ungku Aziz Centre for Development Studies, Universiti Malaya. 

** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.