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Wed 22 Jul 2015 09:57 AM

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UAE energy ministry says to liberalise gasoline, diesel prices

Gasoline and diesel prices will now be based on an average of global prices

UAE energy ministry says to liberalise gasoline, diesel prices
United Arab Emirates Minister of Energy Suhail Mohamed Al Mazrouei. (Getty Images)

The United Arab
Emirates said it would let domestic fuel prices move more freely in a
politically sensitive reform that could save the government billions of dollars
and begin reducing the wealthy country's love of gas-guzzling cars with big
engines.

Gasoline and diesel will be deregulated
from Aug. 1 and a new pricing policy linked to global levels will be
introduced, state news agency WAM quoted the energy ministry as saying on
Wednesday.

"Deregulating fuel prices will help
decrease fuel consumption and preserve natural resources for future
generations," said energy minister Suhail bin Mohammed al-Mazroui.

"It will also encourage individuals
to adopt fuel-efficient vehicles, including the use of electric and hybrid cars."

Matar al-Nyadi, undersecretary of the
ministry and chairman of its new Gasoline and Diesel Prices Committee, told
Reuters that gasoline prices might initially rise slightly because of the
reform, while diesel would fall.

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 U.S. 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.

The ministry's statement did not give
details of the new pricing policy, beyond saying the prices committee would
announce on the 28th of each month prices for the following month, basing its
decision on "average global prices with the addition of operating
costs".

The global price of Brent oil is
currently around $56 per barrel, not far from six-year lows. But linking UAE
prices to global levels could clear the way for substantial hikes in the
future, if Brent starts to recover.

Mazroui said fuel price changes would
not raise the UAE's cost of living significantly, while diesel's expected fall
next month would help the economy.

"This will stimulate the economy as
a lower diesel price would mean lower operating costs for a wide number of
vital sectors like industry, shipping and cargo among many others."

The announcement put the UAE at the
front of economic reform among the rich Gulf oil states. Other governments are
grappling with similar financial pressures but have mostly not had the
political will to push through major change.

Kuwait raised its domestic diesel and
kerosene prices in January but partially reversed the hikes a few weeks later
after criticism by some members of parliament.

Abu Dhabi, the biggest emirate in the
UAE, hiked electricity and water tariffs in January as part of efforts to cut
subsidies.

Jane 4 years ago

Excellent news, as now people will sell their SUVs and buy smaller cars. Also more people will start using public transport and people will start living closer to their workplaces. All in all, a great move that will help the environment and reduce emissions.

Darryl 4 years ago

another day, another extra cost, another reason to reconsider......

James 4 years ago

Very smart move.
Long overdue but well done.

khalid 4 years ago

i think inflation will rise up tremendously.

leo50 4 years ago

Weren't fuel prices raised by 30% in the last couple of years? Did that make a substantial reduction in SUV's? The increased costs of moving goods around the country will also increase prices for the consumer so the knock on effect could be really significant in the market for many.

Remy 4 years ago

Probably the worst time to implement this decision in the last 10 Years. Economy is already slowing down dramatically, I think they should reconsider the move.

Saeed 4 years ago

Great news because this will encourage people to use the world class and efficient public transport and those who keep on harping that they will leave are the ones who will stay put no matter what!!!

SA1 4 years ago

It's a good move in general...though it will pinch many people but will also force companies to provide Employee Transports like Shuttles, buses. Many companies in this region does this only for blue collar employees. Same can be done for office workers.

Right now hundreds of employees come in their own car. Policy should encourage companies to provide for Office buses.

Mtd 4 years ago

good move if more public transportation is provided first in this warm weather such as Emirates wide train to reduce the Sharjah to Dubai to Abu Dhabi and vice versa commuters and metro in other Emirate like in Dubai. Only then you can free market gas prices.

Telcoguy 4 years ago

It is good news indeed. Not so sure you got "why" right, though