Increases in international petroleum prices during 2006 have raised concerns about their implications for the achievement of the Millennium Development Goals (MDGs) and in particular, their implications for poverty reduction. Studying this issue is complicated because increases in petroleum prices affect the poor through several different channels. These include effects on the costs of living of the poor, via increases in the consumer prices of transport and other goods and services which use petroleum as inputs, directly and indirectly. The effects also include impacts on the incomes of the poor, principally via the effects of petroleum prices on the costs of productive sectors of the economy and subsequent effects on employment and wages in these sectors. Finally, there are effects which operate through the government budget. If petroleum products are subsidized, the budgetary costs of these subsidies may be affected by increases in petroleum prices. If petroleum products are taxed, the magnitude of these tax revenues will be affected when petroleum prices change. When the government budget is affected, there may be second-round effects on the poor because the capacity of the government to finance expenditures that may benefit the poor is affected and because changes in tax rates may also be required. This study examines the effect that petroleum price increases have on the poor of Lao PDR, using a general equilibrium modeling approach. This analytical approach is made necessary by the complexity of the linkages between petroleum prices and poverty. The model developed for this purpose is called LaoGEM. Most, but not all, of the poor people of Lao PDR are located in rural areas. These rural people differ widely in terms of the quality of their road access and thus the transport costs for goods and services that they face. A feature of the general equilibrium analysis contained in this study is that the model differentiates between four categories of Lao households: urban households and three categories of rural households, the latter divided according to the quality of road access available to them: (i) no vehicular access; (ii) dry season only access; and (iii) all weather access. Household survey data available for Lao PDR make this division of households possible. It seems likely that petroleum price increases will affect the transport costs faced by these four categories of households in different ways and the analysis aims to show these differences.