Low world oil prices: A chance to reform fuel subsidies and promote public transport? A case study for South Africa

In this study, a computable general equilibrium model simulates the decrease in world oil prices, the reduction in fuel subsidies and two options for reallocation of these subsidies to support the transport sector: either as consumer price support or as subsidies to production in the passenger transport sector. The simulations indicate improved affordability and availability of public transportation services and clearly show positive impacts for the economy, unemployment and household income. They also give some clues on how to improve the transport system in South Africa to pre-empt the situation when oil prices pick up again.