By Staff writer
Institute of Chartered Accountants in England and Wales says move will boost economy, lower fuel consumption
The Institute of Chartered Accountants in England and Wales (ICAEW) has hailed the new UAE oil price deregulation policy, saying it support the national economy, lower fuel consumption, protect the environment and preserve national resources.
Gasoline and diesel will be deregulated from August 1 and a new pricing policy linked to global levels will be introduced, the energy ministry said on Wednesday.
Commenting on the new policy, Michael Armstrong, ICAEW regional director for the Middle East, Africa and South Asia, said: "Deregulating oil prices should support the national economy in the longer term whilst also helping consolidate government finances.
"The context - of sustained lower oil prices - means that the UAE has chosen the right period to adjust oil subsidies."
He said removing subsidies during a period of subdued global oil prices should mean the inflationary impact will be felt less sharply.
Armstrong added: "However, even though prices should not shift dramatically in the immediate future, the knowledge that households and businesses alike will no longer be isolated from global oil prices through government spending should influence behaviour.
"Households will start to think about how they can reduce their reliance on fossil fuels in case of future price hikes. Businesses will start to develop energy use strategies in case of market price rises. This policy should therefore incentivise reduced consumption - and thereby protect the environment and preserve natural resources - going forward."
At present, state subsidies keep gasoline and diesel in the Arab world's second biggest economy at some of the lowest prices in the world. Motorists pay 47 US cents for a litre of gasoline, less than a third of levels in western Europe.
Cutting subsidies and letting fuel prices rise could boost UAE state finances, which have been weakened by a plunge of oil export revenues since 2014 due to the fall in global crude prices.
The International Monetary Fund projects the UAE will post its first fiscal deficit this year since 2009; it estimates the country spends $7 billion annually on petroleum subsidies.