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Wed 29 Jul 2015 10:56 AM

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Fuel price hike will not raise price of UAE goods - Ministry of Economy

Government pledges to work with authorities to monitor the market following the changes

Fuel price hike will not raise price of UAE goods - Ministry of Economy
(Getty Images)

Deregulating fuel prices in the UAE will have no adverse effect on the price of consumer goods, the Ministry of Economy has said.

From August 1, UAE motorists will pay on average 24 percent more for petrol following a decision to remove subsidies for domestic fuel and create a new pricing policy linked to global levels. 

The first retail prices, announced by the government on Tuesday, ranged from AED2.07 per litre for Gasoline E Plus, up from AED1.61 per litre previously; to AED2.25 per litre for unleaded gasoline 98, up from 1.83 per litre.

The price of diesel has dropped from AED2.90 in Dubai to AED2.05 per litre.

In a statement, Mohammed Ahmed Bin Abdul Aziz Al Shehhi, undersecretary at the UAE Ministry of Economy for Economic Affairs, sought to reassure the public that the price of consumer goods will not increase as a result of the changes.

He stressed that the ministry’s Consumer Protection Department would work in cooperation with other authorities across the emirates to tighten control over the market and prevent any attempt to exploit the decision by raising the price of goods.

Initial projections indicated that the decline in diesel prices will trigger a related reduction in transport costs of consumer goods, Al Shehhi added.

And the country’s judicial system will gives the ministry legal authority to penalise any tradesmen who violate consumer laws by selling overpriced items.

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Simon 4 years ago

If I could make an initial suggestion to the UAE Ministry of Economy for Economic Affairs...sweep through Spinneys and other big Supermarkets with your price checking systems...and then sweep through 1-2mths later...unannounced.

I would wager an increase in prices of 10%+ will be observed. Spinneys especially have increased their prices in the last year by a minimum of 15% according to my grocery basket. I hear on other pages on this site that LuLu have increased theirs too...and thats without increased fuel costs.

I imagine school fees will increase too...any excuse to increase fees is always jumped upon and 'Justified'...

Doug 4 years ago

How is this possibly enforceable?

Transporting good requires using fuel. If the fuel price goes up, the transport cost goes up. So what the Ministry of Economy is saying is that retailers will have to make up the shortfall from their own profits.

That's not a sound way to do business. What if the company in question has margins so low that they are wiped out by the fuel cost increase - not exactly unlikely given most businesses turn a profit of less than 5% and these prices have gone up by 24%. Normally they would be able to stay in business because they could raise prices to offset the increase in costs, but according to this, they won't, which means they will go out of business.

You CANNOT raise operating costs and then simultaneously forbid an increase in retail prices. If the UAE wishes to increase fuel prices then it has to accept that this will increase general prices across the country or business will simply collapse. This is basic economics.

MT3 4 years ago

Diesel prices have dropped by nearly 30%; the major distributors have welcomed this move acknowledging the reduction in their operating costs; at worst they will pocket the savings but most have said they will share the savings with customers and, therefore, if the retailers increase prices it is simple profiteering. Most buses and taxis run on diesel too, so the losers are the private motorists and companies that use non-commercial vehicles in their operations. People who drive large 4*4s and other expensive and inefficient cars won't care and their pattern of consumption won't change one iota; it's Joe Public in the Nissans and Toyotas that will get hit but they are also the ones creating the biggest polution issue because there are far more of them so although its tough on them it makes sense.

WMW 4 years ago

Actually the price of diesel went down under the new pricing. Most transport vehicles use diesel so the cost should go down.

Bob 4 years ago

@doug bearing in mind that the majority of goods are transported here via the road using trucks operating on diesel then the cost in shops should remain the same or in an ideal world - without profiteering retail outlets - reduce seeing as the ministry reduced the cost of diesel significantly and only increased petrol prices.

However I wouldn't put it past the owners of stores to try and increase prices of their already overpriced products and try and use the excuse of fuel increases - for this I welcome the government position of making sure that the innocent public are not punished twice with increased fuel prices and increased store prices by unscrupulous store owners.

If the UAE was a true free market then people would vote with their wallets and store owners would have to actually charge fair prices - as it is the shopping situation is little more than a closed shop with similarities to a cartel. Again - anything that the government can do to protect the consumer is welcomed.

Doug 4 years ago

Fair point on diesel ;)

Just wondering though, do we really need some sort of law enforcement on prices?

Say I'm BigBadCompany and I decide to raise the price of my widgets by 10% citing 'fuel costs', even though they haven't affected my operating costs.

Why can't I do that? Surely the market is self-correcting because then NotQuiteSoBadCompany will raise its prices by 9%. BBC will then think 'hang on, now everyone's buying from NQSBC because they're a bit cheaper. But we know our prices are artificially high. So we can drop them down to 5% more, beat NQSBC and STILL make more money'

And then NQSBC goes through the same thing until we're basically back to where we started, very quickly. That's the nice thing about free markets - they're self-correcting.