Petroleum Prices and Poverty in Laos

Laos depends heavily on imported petroleum for its fuel requirements. The volatility of international petroleum prices has raised concerns about its implications for poverty, but the linkages between petroleum prices and poverty are complex. This study examines the effect that petroleum prices have on the poor of Laos, using a general equilibrium modelling approach, which emphasizes the way transport costs impact on different categories of households. The results indicate that higher petroleum import prices raise transport costs and thereby harm rural people, among whom poverty incidence is highest, more severely than urban people, because rural people are more vulnerable to increases in transport costs.