Links Between Energy Prices, Fuel Subsidy Reform and Instability

Abstract

Increasingly, the links between energy insecurity (including energy prices, availability, and fuel subsidy reform) and instability are being studied. These issues often become flashpoints for social mobilisation and protest. Previous research has started to explore different types of fuel-related conflict and its relationship with scarcity, abundance, and energy prices but the research is fragmented. Much of this existing research focuses on a possible link between oil and armed conflict and rebellion, rather than on fuel prices as a source of intra-state instability below the level of armed conflict. It is argued that this research gap is important as these protests often have the potential to escalate into broader political movements, and the pressures to reduce reliance on carbon-heavy fuels through increased taxation or the reduction of subsidies is increasing.

This rapid review provides an overview of the evidence on the links between energy prices, subsidy reforms and the risk of instability. It first highlights these links and discusses the literature, and then provides some brief evidence on recommendations and lessons learned on managing the impact of subsidy reform processes. The review was unable to identify any indicators of risk or quantitative metrics for appraising energy-related instability, apart from the unique fuel riots database created by Natalini et al. (2020). This rapid review takes a wide view of “instability” and what that means.