19 Republic of Iran, Iraq, Malaysia, Nigeria, Reública Bolivariana de Venezuela, Vietnam, and the Republic of Yemen. As with diversion and adulteration, financial incentives for smuggling are so powerful that it is difficult to control it. Steps to curb it include raising prices substantially along the borders in the Islamic Republic of Iran and República Bolivariana de Venezuela, provision of subsidized petroleum products by República Bolivariana de Venezuela to Colombia, expropriation of retail outlets accused of smuggling in República Bolivariana de Venezuela, and restrictions on fuel purchase along the borders in Malaysia.

A related problem is fuel tourism, where drivers in other countries cross the border to refuel to exploit differences in taxes and subsidies. In Argentina, filling stations near the Brazilian border list two different prices for gasoline, one for cars with Argentinian license plates and another one for foreign plates, to restrict Brazilian drivers from buying cheaper fuel in Argentina (Energypedia). Since 2009, Bolivia has been charging international prices, set every quarter, to vehicles with foreign license plates. Malaysia’s restrictions on fuel purchase―a maximum of three quarters of a tank for refill for Singaporean license plates and 20 liters within a 50-kilometer radius for other foreign license plates―also target fuel tourists.

At the opposite end of the spectrum are those markets into which fuels are smuggled. In 2009, citing a study, Petron Corporation in the Philippines said that fuel smugglers were controlling one-third of the petroleum market, resulting in an annual government revenue loss of ₱30–35 billion (US$630–730 million) (HIS 2009). A country surrounded by lower-price neighbors would find it particularly challenging to reform price subsidies, which would increase the price differences further and enhance the incentives for in-smuggling, as happened in Togo in 2009 (IMF 2010). Turkey requires all fuel importers and distributors to add a fixed proportion of a national marker to gasoline and diesel to discourage in-smuggling and adulteration (Platts 2011d).

Selling the same product at different prices provides another avenue for making illegal gains. If the price difference is sufficiently large, it may even be more profitable to concentrate on illegal diversion than on the beneficiaries’ main line of business. This is particularly problematic in fisheries where fishing boats are suited to transporting large quantities of subsidized fuel. In August 2012, the government of Malaysia announced that, in order to reduce abuses by fishermen receiving subsidized fuel for their boats, a representative of the Malaysian Fisheries Development Authority would in the future verify each catch landed, and those with insufficient catch would no longer be permitted to buy lower-priced fuel ( _Borneo Post_ 2012). The Philippines abandoned a plan for a fuel subsidy scheme for agriculture and fisheries in May 2011, citing difficulties with beneficiary identification ( _Philippine Star_ 2011).

Electronic monitoring of subsidized fuel purchase has been proposed as one way of combatting illegal purchase of subsidized petroleum products. This could be designed to enable monitoring of all fuel transactions, including information on the vehicle, the customer, the amount purchased, the time of purchase, and the location. The three state-owned companies in India supplying subsidized fuels are automating transactions to curb commercial malpractice ( _Automation World_ 2011). Similarly, President Yudhoyono of Indonesia announced in May 2012 that the government was planning to start electronic monitoring of subsidized fuel purchase ( _Jakarta Globe_ 2012a), although there has been little progress to date.

Diversion of LPG subsidized for household use to the automotive, commercial, and industrial sectors is common. Aside from misuse of subsidy funds, such diversion can pose a serious threat to public safety. LPG cylinders have been known to be chained to cars without