Posted September 02, 2015
For example a country does not produce oil that it had to import a lot from other countries.
It may be due to geographical reason or sanction or pirates raid or whatever reason that the price of oil are high. As it affect transportation, it will jack up the price of everything else. It can cause unscrupulous hording of oil and other basic materials to jack up the price of the market artificially and make the common man suffer.
The government can enforce the law that the price of oil must be fix at such, but supply and demand flourish the black market like Russia and does not help much. So the government subsidize oil price to stabilize the market. selling oil at a discount if they had to.
If oil is scarce and expensive it would be much better to subsidize (or stimulate by other means) the efficient usage of oil or the replacement by other things which might be available at lower costs like electric heating instead of oil heating like better insulation like smaller and more efficient cars like better public transport like ...
Then this whole subsidization has an organizational overhead which costs money.
And it is prune to corruption. Who decides to whom the money goes. (For example here to CDP. Really to CDP???)
And in the European Union for example they do not subsidize oil, they subsidize agriculture and that in a region of the world where food can be produced in abundance. This is totally crazy. For example for some time they paid farmers to produce milk and butter and then paid for destroying it or cheaply exporting it. Or for another example the Mafia in South Italy is probably living on EU subsidies and the outcome is that this part of Italy does not become better (no incentive because the subsidies would not be given then anymore).
There may be good subsidies, for example food subsidies in poor countries but everything that goes beyond is most likely a big waste and or source of corruption (in my experience). I think in most cases it would be better to leave the money with the people and let them just spent it as they see fit.
It is a kind of distribution of wealth, but unfortunately as you said corruption and whatnot make it easily abused.
Then again, a corrupt government will abuse anything anyway, so it may be better to have such subsidies in place. At least not all of the money is going into the politicians pocket. They have to show some figures to lie to the public.
