No more cheap petrol

UAE to start pay­ing more for petrol af­ter hike, but less for diesel

The Witness - Wheels - - FRONT PAGE -

SPARE a thought for driv­ers in the United Arab Emi­rates (UAE) who have long be­come used to dirt-cheap fuel, for to­mor­row night they start pay­ing through the nose like the rest of us.

The UAE said last week it will stop sub­si­dis­ing fuel prices by Au­gust 1 and in­stead al­low prices to move more freely, which means mo­torists in the Emi­rates have un­til to­mor­row mid­night to pay only about a third of what mo­torists in South Africa pay for each litre of petrol. Strangely, truck­ers will pay less for diesel.

UAE state news agency WAM quoted Energy Min­is­ter Suhail bin Mo­hammed al-Mazroui that a new pric­ing pol­icy linked to global lev­els will be in­tro­duced.

“Dereg­u­lat­ing fuel prices will help de­crease fuel con­sump­tion and pre­serve nat­u­ral re­sources for fu­ture gen­er­a­tions,” he said.

“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 chair­per­son of its new Ga­so­line and Diesel Prices Com­mit­tee, told Reuters that petrol prices might ini­tially rise slightly be­cause of the re­form, while diesel would fall.

At present, state sub­si­dies keep petrol and diesel in the Arab world’s sec­ond big­gest econ­omy at some of the low­est prices in the world. Mo­torists pay less than a third of lev­els in western Europe for a litre of petrol.

Cut­ting sub­si­dies and charg­ing tax on higher fuel prices will 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, thanks to shale oil from frack­ing in the U.S.

The In­ter­na­tional Mon­e­tary Fund projects the UAE will post its first fis­cal deficit this year since 2009; it es­ti­mates the coun­try spends $7 bil­lion (R88 mil­lion) 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”.

Link­ing UAE prices to global lev­els could clear the way for sub­stan­tial hikes in the fu­ture, if Brent starts to re­cover from cur­rent six-year lows.

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. — Reuters-WR.

PHOTO: SUPPLIED

Like the rest of the world, driv­ers in the United Arab Emi­rates (UAE) start pay­ing through the nose for fuel from to­mor­row night.

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