New petrol price deal ‘boost for economy’

Broad welcome for end to state support and establishment of independent panel to set fuel prices based on global market

ABU DHABI // The end of petrol price control was hailed yesterday as good news for the environment, a potential boost for public transport, and sound economic and fiscal sense.

From next month, the cost of fuel at the pump will no longer be regulated by central government. Instead it will be set each month by an independent fuel price committee and based on an international market index.

The committee’s first meeting next week will set prices for August based on international fuel price trackers such as Oil Price Information Service, plus a margin for the distribution companies Adnoc and Enoc.

“We think the price of diesel initially will go down a little and gasoline might go slightly up,” said Matar Al Nyadi, undersecretary at the Ministry of Energy and chairman of the new prices committee. “Liberating the market, we believe, will reduce consumption and … encourage a more efficient type of car.”

Analysts welcomed the deregulation. “It encourages people to conserve the use of gasoline and reduce unnecessary driving, and it protects the environment and encourages people to look to new forms of transport,” said John Lodewijks, a professor of economics at SP Jain School of Global Management in Dubai.

Abdullah Al Dhaheri, chief executive of Adnoc, said deregulation would “cut fuel consumption, protect the environment and preserve natural resources for future generations”.

At about Dh1.72 a litre, the price of petrol is the highest in the Arabian Gulf region but among the lowest in the world: supporting energy prices costs the state more than Dh100 billion a year.

Deregulation is expected to slash that cost. “It’s an encouraging step as the Government tries to place the public finances on a sounder footing,” said Jason Tuvey of Capital Economics in London.