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Thu 2 Jan 2014 04:27 PM

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Why Bahrain's higher petrol prices should be welcomed

Gulf states need to re-assess their historical subsidies for items such as petrol, food and electricity, Courtney Trenwith argues

Why Bahrain's higher petrol prices should be welcomed

Petrol prices in Bahrain are set to go up early this year as the government comes to the realisation that it can no longer afford to heavily subsidise the commodity.

While that means paying more to get around, inevitably creating a political sting, it makes serious sense.

The island kingdom can no longer sustain such significant discounts, which have been in place for more than 30 years.  

Deputy Prime Minister Shaikh Khalid bin Abdullah Al Khalifa revealed this week state subsidies covering essential items such as petrol and some foods have risen 73 percent in the past five years to a whopping $3bn. For a state in the red and facing a further financial slide, re-assessing its handouts is essential.

Al Khalifa, who is part of the ruling dynasty attempting to maintain a grip on power amid opposition from the majority Shia population, has raised the prospect of subsidies being cut or axed for expatriates, who make up more than half of the population of 1.3m. It seems reasonable to question why a foreigner should be entitled to state money. However,  it should be taken into account that they are helping to prop up the economy, not to mention fulfilling the low caste jobs that you’d be hard pressed to find any Bahraini national willing to perform.  

But the cheap fuel also is reportedly being smuggled across the border, giving benefits to foreigners who may make no or little contribution to Bahrain.

There are environmental factors at play also. Every gallon of gas burned by a vehicle emits nearly 25 pounds of carbon dioxide and other global-warming gases into the atmosphere, according to US scientists.

When petrol is so cheap it’s practically free there is no incentive to reduce driving and therefore green house gas emissions. Rising the price may make it more difficult for some to go on driving or force others to cut theirs back, but is that really such a bad thing? The money saved by the government could be funnelled into public transport infrastructure, among many other important services.

The government and elected MPs are due to discuss reforms to other subsidies next week. 

The outcome surely will be closely monitored by other Gulf states, which also are facing tough decisions around the continuing relevance of subsidies at a time when the state books are nowhere near as healthy as they once were.

Santhappan 6 years ago

Yes Ofcourse, Improving the Public Transport system will help to reduce the consumption of Oil.

Bahrain is one of the country, encouraging the private vehicles and not creating awareness about the Public Transport.

The current Public transport covering 20% of the Main Places in Bahrain. 80% of Shopping malls, tourist destinations, residential areas not connected with Public Transport. At least, if they connect all the places, the huge expat population will use the public transport.

Jimmy 6 years ago

It would make sense to get your facts right. It is only the subsidy for diesel that might go up - very slowly in stages up to 2018. This would not affect the average driver using petrol but would increase the costs for commercial vehicles so possibly costs of goods might go up. There has never been serious talk of removing subsidies for expats. It costs me £7 to fill my SUV compared to £70 in the UK - frankly it is unsustainable and Bahrainis should live in the real world or have austerity measures forced on it in 10 years time by the IMF.

H. Dadlani 6 years ago

I think that a Metro system like Dubai would be much more feasible and economical to start with ......