Qatar denies diesel hike will affect price inflation

Firms warned not to “abuse” their market power by resorting to price hikes in their goods and services
(Photo for illustrative purpose only)
By Beatrice Thomas
Wed 25 Jun 2014 01:41 PM

Qatar says a recent 50 percent increase in retail diesel prices will have no major impact on the consumer price inflation and warned companies not to “abuse” their market power by resorting to price hikes in their goods and services, Gulf Times reported.

The Ministry of Development Planning and Statistics said in its Qatar Economic Outlook 2014-15 that “any impact of the diesel price increase on consumer price inflation will be temporary. As it represents a one-step upward shift in the price level, its direct impact on inflation will be confined to the remainder of 2014 and the first five months in 2015 due to the resulting base effect.”

This direct base effect is also expected to be minor, as the weight of diesel fuel in the consumer price index is small; most private vehicles - still the primary mode of transport - consume petrol (gasoline), it said.

In May, Woqod increased the retail price of diesel to QR1.5 (41c) a litre from QR1 (27c) at all fuel stations and also raised the bulk price for projects - to local companies and joint ventures - to QR1.5 and QR1.8 respectively, even as it spared companies based outside Qatar, which will continue to pay QR1 a litre.

When fuel prices were raised in January 2011 - diesel by 30 percent 25 percent for diesel and petrol respectively - CPI inflation was under 2 percent.

The report said an increase in diesel prices may have knock-on or indirect impacts on the cost of consumer goods through its effect on costs, though these impacts were also likely to be small as many consumer goods were imported, and the physical size of the country meant that goods were not transported over long distances by road.

“The diesel price hike may prompt some companies to abuse their market power - using them as an excuse to raise the price.

Qatar’s economy is likely to grow 6.3 percent this year, much faster than previously expected and well ahead of other oil exporting Gulf states, helped by robust domestic demand, a report showed on Tuesday.

Gross domestic product growth in the world's top exporter of liquefied natural gas is forecast to hit 7.8 percent in 2015, its fastest rate since 2011, said the report of the Ministry of Development Planning and Statistics. It was 6.5 percent in 2013.

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