Manufacturing firms shouldn’t fear the true cost of fuel – here’s why

In the blog post Manufacturing firms shouldn’t fear the true cost of fuel – here’s why, we analyse the effect of energy price increases on firm-level productivity in Oman:

UNIDO-led research in collaboration with the World Bank provides concrete evidence that removing fossil fuel subsidies would not only make environmental sense but would also improve firms’ economic performance. New firm-level data from Oman show that higher fuel prices are not a drag on competitiveness. In fact, reducing subsidies and allowing fuel prices to rise could ultimately aid the post-COVID-19 recovery. This is because, according to the data studied, higher fuel prices drive business upgrading, leading to a boost in productivity. They could also encourage manufacturing companies to switch to the kind of long-term sustainable efficiency practices needed to stop climate change.

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More information on the corresponding publication Switching it up: The effect of energy price reforms in Oman (World Development, 142) is available here.