There is several meaning of fuel subsidy.

According to Sumaila, Teh, Watson, Tyedmers, and Pauly (2010) fuel subsidies are dened narrowly here as the price differential between what other users and shers pay for fuel in a given economy. While according to Nkemjika (2012) fuel subsidy is as the financial augmentation of the cost of commodities by a Government, which act enables the citizens of a country to buy or take possession of items or products at reduced prices when compared to their actual cost of production and distribution.

According to McKenzie and Mintz (2011) subsidies is viewed as a reduction in the cost of buying a good or service and reduction in the price of a product, purchasers will be more willing to buy more of it and producer will be more willing to supply it. While according Bakare (2012) to sell a product below the cost of production. Since the Federal Government has been secretive about the state of our refineries and their production capacity, more focus on importation rather than production. This research paper is more favourable view of Nkemija (2012) because subsidy fuel is purchased more cheaply compare from market price.

There are many effect of fuel subsidy to many countries. According to Gardner (2007) the price discrimination fuel subsidy will occurred between fuel and crops used for feed and export purposes. Consequently, it reduces the buyers price of fuel and by products but increasing the price of crops fed and exported. However, according to Bulman, Fengler and Ikhsan (2008) subsidies of fuel lead opportunities for crimes such as corruption and smuggling of products. When the weakness of authority, some of people takes an advantage to buy fuel subsidy domestically at below-market prices and smuggled to other countries.

While, according to Narayanan, Sua, Rama, Alavi and Abdullah (2007) the fuel subsidy will cause budget deficit to any country. That is because subsidies have been a rising governments expenditure for every each year and subsidies do not always helping the poor. However, there are arguments when according to Granado, Coady, and Gillingham (2010) subsidy fuel can reduce poverty. Same goes to Breiseinger, Engelke, Ecker (2011) subsidy fuel can strain public finances and provide a blunt tool to fight against poverty. In many countries use fuel subsidy are comparable in size to public spending on health and education.

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According to Khan, Sumaila, Watson, Munro and Pauly (2006), subsidy fuel can reduce the cost of fisheries operations and increase revenues for fishing enterprises. This benefit given from government directly or indirectly in development of fish industry to any country. Then, according to Green (2009) subsidies for commercial fishers to decommission their boats and leave the fishery may be more helpful, as may fuel subsidies for the law enforcement patrols needed to keep commercial fishers out of small scale fishing grounds and manage the no-take areas of the country.

However, according to Fischer and Toman (2001) fuel subsidy will effect to environment such as emissions of carbon dioxide and greenhouse gas. That is because environmental damage comes from two main sources which are end-use combustion, primarily in the form of gaseous emissions, and production by products, such as effluents, leakages, accidents, spills, and reclamation costs. According to Dernbach and Koplow (2001) subsidy fuel can reduce government costs and for making government actions more consistent.

On the other hand, according to Steenblik (1998) believe that fuel subsidy will effect the environment, including biological resources. Then, according Scheneider and Saunders (2000) fuel is major contributor to greenhouse emissions. This is because growth in fuel consumption will cause increment of emissions of greenhouse.There are various views about the effect of fuel subsidies. However, this research paper is more favourable to Fischer and Toman (1998) because the effect of subsidy fuel towards environmental problems will be faced by all countries.

There are several effect of removal fuel subsidy. According to Barakat (2008) removal of the fuel subsidy will affect the market in both supply and demand. Increase in oil prices affects the supply side through making it more costly for firms to produce goods. The demand side will be affected through wealth and will induce uncertainty about the future. Thus, output growth will be affected negatively. While according to Nwafor, Ogujiba,and Asogwa (2006) without spending of the associated savings, would increase the national poverty level. This is due to the consequent rise in inputs costs which is higher than the rise in selling prices of most firms and farms.

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According to Burniaux, Chateau and Sauvage (2011) removing subsidies to the consumption of fossil fuels features as a priority option in the portfolio of policies aimed at stabilising the concentration of carbon in the atmosphere. It would both help reduce carbon emissions while bringing real income gains to some of the countries that undertake the reforms. On this paper is more favourable view by Burniaux, Chateau and Sauvage (2011) because when the removal of subsidy fuel, consumption will reduce and it will reduce emission of carbon in the atmosphere.

Conclusion

Based on the literature review, this paper would like to address the following research question:

1. What is the best strategy to reform fuel subsidy? 2. Why have different effects of fuel subsidy between developed and developing country? 3. What is alternative fuel that can replace current fuel?

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References
McKenzie, K., & Mintz, J. (2012). The Tricky Art Of Measuring Fossil Fuel Subsidies : A Critique Of Existing Subsidies. 2-7. Bakare, T. (2012, January 17). Much ado about fuel subsidy. Vanguard. Retrieved March 19, 2012, from: http://www.vanguardngr.com/2012/01/much-ado-aboutfuel-subsidy/ Barakat, N. (2008). Impact of the Removal of the Fuel Subsidies on the Manufacturing Industry in Jordan. Amman: Sustainable Achievement of Business Expansion and Quality (SABEQ) Nkemjika. (2012, January 15) .The Case For Oil Subsidy Removal. The Guardian. Retrieved March 19, 2012, from: http://odili.net/news/source/2012/jan/15/11.html Arze del Granado, J., Coady, D., & Gillingham, R. (2010).The Unequal Benefits of Fuel Subsidies: A Review of Evidence for Developing Countries. Retrieved March 17, 2012, from http://www.imf.org/external/pubs/ft/wp/2010/wp10202.pdf Breisinger, C., Engelke, W., & Ecker, O.(2011) Petroleum Subsidies in Yemen. Retrieved March 17,2012, from http://www.ifpri.org/sites/default/files/publications/ifpridp01071.pdf Bulman, T., Fengler, W., & Ikhsan, M. (2008). Indonesia's Oil Subsidy Opportunity. Far Eastern Economic Review, 171(5), 14. Burniaux, J. M., Chateau, J., & Sauvage, J. The trade Effects of phasing-out fossilfuel consumption subsidies: OECD, COM/TAD/ENV/JWPTE (2010). Dernbach, J. C., & Koplow, D. (2001). Federal fossil fuel subsidies and greenhouse gas emissions: a case study of increasing transparency for fiscal policy. Annual Review of Energy & Environment, 26, 361. Fischer, C., & Toman, M. (2001). Environmentally and economically damaging subsidies: concepts and illustrations. Climate change economics and policy: an RFF anthology, 143. Gardner, B. (2007). Fuel ethanol subsidies and farm price support. Journal of Agricultural & Food Industrial Organization, 5(2), 4. Khan, A., Sumaila, U. R., Watson, R., Munro, G., & Pauly, D. (2006). The nature and magnitude of global non-fuel fisheries subsidies. Fisheries Centre Research Reports, 14(6), 5.

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Narayanan, S., Sua, T. Y., Raman, S. R., Alavi.,Abdullah, N., et al. The Challenges of Raising Revenues and Restructuring Subsidies in Malaysia. Kajian Malaysia, 25. Sumaila, U. R., Teh, L., Watson, R., Tyedmers, P., & Pauly, D. (2008). Fuel price increase, subsidies, overcapacity, and resource sustainability. ICES Journal of Marine Science: Journal du Conseil, 65(6), 832-840. Steenblik, R. (1998). Subsidy reform: Doing more to help the environment by spending less on activities that harm it. Nwafor, M., Ogujiba, K., & Asogwa, R. (2006). Does Subsidy Removal Hurt the Poor. AIAE research paper, 2. Green, S. (2009). The Sea Around Us Project Newsletter. Vancouver: Fisheries Centre. Saunders, M., & Saunders, K. (2000). Removing Energy Subsidies in Developing and Transition Economics. 14, 1-7.

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