Riyadh may raise fuel prices by 30%

Industry sources say the new rates to be introduced likely from July are part of a reform plan

Saudi Arabia may increase its domestic gasoline prices by 30 per cent from July, industry sources said, part of a reform plan by the world’s top oil exporter to align its fuel prices with global benchmark levels.

In December 2015 the kingdom raised the price of 95 octane gasoline to 0.90 riyal ($0.24) per litre from 0.60 riyal.

However, that still kept Saudi Arabia among the countries with the cheapest gasoline prices in the world.

The government now wants domestic fuel prices to be on a par with international levels by 2020. The move, part of reforms to ease the burden of subsidies on government finances, will drive energy efficiency and cut consumption, sources say.

“Basically, a 30 per cent is what everyone is talking about,” said a person familiar with the matter who declined to be identified.

Two other industry sources confirmed a 30 per cent rise was being considered. A third source said a decision had yet to be taken on the exact increase and the mechanism for doing it.

“There might be a change in the date or the percentage of the increase in line with the financial burden that citizens may shoulder,” one of the sources said.

The Saudi Ministry of Energy did not respond to a request for comment.

Energy Minister Khalid Al Falih had said the gasoline price will be linked to a benchmark price.

Analysts say, the kingdom, the largest economy in the Gulf region is likely to follow the mechanism of the UAE and link domestic fuel prices to international ones.

As the government tries to curb wasteful consumption, the fuel increase is linked to “The Citizen Account”, from which cash handouts will be given to low to medium income Saudis.

“People have already started to switch to lower grade gasoline and if they haven’t then they will do it this year, the cash handouts will alter consumer behaviour but may benefit other sectors in the economy,” said Mustafa Ansari, an energy analyst at APICORP.

Policies and measures will be determined by a ministerial committee made of ministers of labour, finance, economy and planning for the Citizens Account before May 1, said Majed Al Osaimi, the general supervisor of the social development sector and the Citizen Account.