Oil Taxation, Aid Efficiency, and Social Justice: What Strategy for Morocco Facing Energy Shocks? 2246
When the Russia-Ukraine war broke out, global energy markets were brutally disrupted. The barrel price crossed historic thresholds, triggering an immediate surge in pump prices in net importer countries like Morocco. In response, the government opted for direct aid to transporters to contain inflation and prevent pass-through to goods and services prices. However, the experience revealed its limits.
Despite the subsidies, transport prices did indeed rise, pulling up the cost of all products and services in their wake. This gap between intention and reality raises a central question: how to effectively cushion an energy shock in a liberalized economy without widening inequalities or fueling rents?
The decision to specifically aid transporters rested on the implicit assumption that they would act as shock absorbers, absorbing part of the increase. Yet, in a market with tight margins and fierce competition, it is economically rational for operators to pass on costs to fares, despite public support.
Several factors explain this relative failure:
- Lack of binding mechanisms. No strict obligation prevented pass-through to final prices.
- Windfall effect. Some companies received aid without altering their pricing policy.
- Targeting difficulties. Aid benefited a specific segment without ensuring a broad, lasting impact on the economy.
This observation is all the more troubling since Morocco remains heavily dependent on refined product imports following the closure of the Samir refinery.
Today, tensions around the Strait of Hormuz are reigniting fears of a new oil shock. This maritime corridor, through which about 20% of global oil transits, is a critical chokepoint in worldwide energy supply. Any disruption sends prices soaring and, mechanically, pump prices in Morocco.
States worldwide have adopted varied strategies, with mixed results:
- Price caps. Effectiveness is immediate, with tariff shields on electricity and gas, sometimes paired with fuel caps. These measures contain short-term inflation at the cost of very high budgetary expense, disincentives to energy sobriety, and windfalls for the wealthiest consumers.
- Direct transfers. A social but imperfect response. Some countries issued energy checks or lump-sum aid to households. Politically popular, these tools are often criticized for their inflationary nature, lack of precise targeting, and risk of fostering dependence on one-off aid.
- Tax modulation, a structural lever. Several states, like Austria, Spain, Italy, or Japan, chose to temporarily cut fuel taxes to limit pump price hikes. This approach directly affects the final price paid by all consumers, without intermediaries. It relies on principles of readability and shared effort between the state and users.
In Morocco's case, a significant portion of the pump price consists of taxes—such as TIC and VAT—which heavily influence the per-liter price and give the state major leverage in price formation. Temporarily reducing these taxes would establish an explicit shock-sharing mechanism between the state and citizens, rather than concentrating aid on one sector.
This option offers several advantages:
- Universality: it benefits everyone, from truck drivers to salaried workers using their car for commuting.
- Transparency: the reduction is immediately visible at the pump, boosting trust and the readability of public action.
- Economic efficiency: it directly lowers fuel costs.
- Social justice: by forgoing part of the fiscal rent on a now-essential product, the state clearly shoulders its share of the effort.
Targeted and temporary reduction of oil taxation thus emerges as the most effective and democratic solution to cushion an energy quake. This path is not new in Moroccan debate, as evidenced by the widespread support via the Compensation Fund, phased out from 2015 onward.
Lightening fuel costs through subsidies has already been implemented without achieving the theoretically expected results. Need we remind?
Any tax reduction, if enacted, cannot be unlimited or permanent but must be strictly time-bound, calibrated to budgetary capacity, and linked to broader hydrocarbon market reform (competition, margins, strategic storage, reopening or alternative to national refining capacity). In other words, tax modulation should not be a short-term reflex but the tool of a comprehensive energy security strategy.
Morocco faces a strategic choice: persist with one-off aid to transporters or embrace shock-sharing via taxation. If it chooses the latter and loses short-term revenue, it will gain in social cohesion and economic predictability, with three key lessons:
- Prioritize direct mechanisms via taxation, a key pump price component, as the most effective tool for rapid, universal, and democratic action.
- Avoid market distortions. Targeted aid without strict controls produces opposite effects; it fuels rents without protecting the end consumer.
- Think long-term. Energy issues cannot be divorced from industrial sovereignty (refining, storage) and state budgetary resilience.
Beyond conjunctural management, it is a true social contract around energy that must be rethought. In a country where the car is both a work tool, a means of access to essential services, and a vector of mobility, fuel price is a deeply political issue at the intersection of social justice and budgetary sustainability.
Rather than multiplying one-off devices for a single sector, Morocco would benefit from a more systemic approach based on fiscal transparency, equity, and economic efficiency. Fuel tax modulation, as a universal and immediate lever, better meets democratic demands. It is a more credible response to current shocks and those to come.
