16 In the face of serious fuel shortages, Russia increased export taxes on petroleum products steeply in 2011. The export tax on gasoline in May and June 2011 corresponded to nearly US$50 a barrel, effectively acting as a de factor export ban, with serious adverse effects on Kazakhstan, Mongolia, Tajikistan, and other importers from Russia.

Kazakhstan in recent years has banned exports of light petroleum products annually for about six months at a time to deal with fuel shortages during the agricultural season. A temporary ban that began in May 2010, however, has been repeatedly extended to the end of June 2013. China imposed a temporary ban on diesel exports in 2012.

# **3.2 Impact on supply and demand**

Policies intended to help consumers by keeping prices low have had negative consequences on supply in a number of countries. Commercial malpractice―black marketing, diversion to ineligible consumers who are otherwise required to pay higher prices, fuel smuggling, fuel adulteration, and short-selling―and fuel shortages are two of the most common negative outcomes of governments’ efforts to keep domestic prices low. In the extreme, low prices have made the downstream oil business not financially viable, retail outlets have run out of petroleum products altogether, or have even shut down. At the same time, artificially low prices have done little to discourage inefficient or nonessential fuel consumption, and large price differences for otherwise similar fuels have distorted consumption patterns.

# **_Lack of essential investment and disinvestment_**

The combination of total lack of competition due to their monopoly status and negotiating subsidy repayments, capital expenditures, or both with the government has harmed government-owned refineries in the Islamic Republic of Iran, Iraq, Mexico, and Nigeria. As a result, all are major net oil exporters but have had to import some or significant amounts of petroleum products at world prices and sell below costs of supply. One consequence is that refinery rehabilitation and expansion plans have languished for lack of capital, and shortages of fuels at subsidized prices, or even of fuels at any price, have occurred except in Mexico.

In March 2010, it was reported that some 3,500 filling stations in Argentina had closed since 2005 on account of poor profitability (IHS 2010d). In India, the largest private oil company, Reliance Petroleum, closed down all of its 1,432 filling stations in 2008. Earlier, in 2005, Essar Oil had closed all of its 1,250 filling stations (Kojima 2009). Essar has since reopened its retail outlets.

# **_Fuel shortages_**

Although not related to pricing policies, events outside the country (such as those in transit countries), events outside the petroleum sector (especially power), or protection provided to inefficient domestic refineries can lead to fuel shortages. Two land-locked countries—Rwanda and Uganda—rely on Kenya as a transit country for fuel supply, and supply disruptions in Kenya are inevitably transmitted to these markets (see Kojima 2009 for earlier examples). Power shortages in Kenya have shut down refinery and oil pipeline operation, leading to fuel shortages in all three countries. Power shortages also increase demand for diesel for backup power generation, and diesel fuel shortages can occur if the demand increase is large enough. In Zambia, where the sole domestic refinery is protected with high import tariffs, unscheduled or