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Why the cost of subsidies is going to increase
Today, 220 SR billion is spending Saudi government to subsidize oil products. The consumers pay a low price for oil products because of that the difference in price is paying by the government. Around 70% to 75% of the internal demand oil of energy price paid by the governments. These ratios are going to increase for many reasons. However next coming days the cost of subsidies will increase for three main reasons: population growth, GDP growth and
electricity consumption.
- Population growth.
Population growth is an increase in the number of people over time that resides in a country. For example according to the demographics we have between 2004 and 2015 the population increased from 22.67 to 29.67 which is around 30% increase. One main reason for increasing subsidies cost was population growth. Since the population increased by 30% so the oil consumption probably also increased by 30%. Population growth led to part of the increase in cost of subsidies.
-GDP growth.
Gross domestic production (GDP) per capita is a measure of the total economic output of a country that takes the gross domestic products and divided it by the number of people in the country. For example GDP in 2011 was 24K which is around 33% more at 2007. As a result of that increase the number of cars probably increased by the cost of subsidies.
- Electricity consumption.
Electricity consumption is the amount of electricity consumed by people. In 2000 the electricity consumption was 118 billion kWh per person then it increases to 300 billion kWh per person in 2011 so we can say that building house increased absolutely. As a result of that increase of electricity consumption the cost of subsidies would increase also.
The three reasons of increasing subsidies cost in Saudi Arabia are population growth, GDP growth and electricity consumption. As these 3 main reasons continue to growth and increase the cost of subsidies will also increase. I recommend the government to educate the citizens to reduce using electricity during day time and don’t squander while they are using it.
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