No more cheap petrol
UAE to start paying more for petrol after hike, but less for diesel
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.
Like the rest of the world, drivers in the United Arab Emirates (UAE) start paying through the nose for fuel from tomorrow night.