Captains of industry welcome decision
Consumers fear move may hurt, but oil and gas industry heads paint bigger picture in which economy benefits
ABU DHABI // A decision to link petrol and diesel prices to global oil markets has been described by industry leaders as an important reform initiative for the country.
Suhail Al Mazroui, the Minister of Energy, announced yesterday that fuel prices will be deregulated from August 1 as part of the government’s plan “in diversifying sources of income, strengthening the economy and increasing its competitiveness in addition to building a strong economy that is not dependent on government subsidies”.
Oil and gas industry chiefs, finance ministers and energy leaders applauded the move.
Abdullah Salem Al Dhaheri, chief executive of Abu Dhabi National Oil Company, said the move would “help cut fuel consumption, protect the environment and preserve natural resources for future generations”.
He said Adnoc took pride in its “contribution to boosting economic growth in the UAE for a better future and achieving sustainable development”.
At present, state fuel regulations keep petrol and diesel prices in the Arab world’s second-biggest economy at some of the lowest globally.
Removing support will make individuals more responsible and careful in their fuel consumption patterns and contribute to preserving natural resources, said Younis Khouri, the undersecretary of the Ministry of Finance.
The decision will boost the free market economy and restrict the state’s direct intervention in economic activities, he said.
Saif Humaid Al Falasi, chief executive of Emirates National Oil Company, also welcomed the move. “We are committed to everything that can contribute to achieving sustainable development in the UAE and boosting economic growth,” he said. “The decision will help achieve the UAE vision of ensuring the continuity of sustainable development by cutting fuel consumption and therefore preserving natural resources and protecting the environment.” Mohammed Ahmed Al Shehi, the undersecretary of the Ministry of Economy for Economic Affairs, said that the decision did not aim to increase prices, but rather to change the fuel pricing structure to create a balance between the domestic and world markets.
According to a study by the Department of Energy, fuel prices are expected to decrease from the current prices after the decision takes effect, he said.
Mr Al Shehi said this would have a positive effect on the markets because lower fuel prices help to reduce production costs in many sectors, such as transportation and construction.
The decision was part of efforts to protect oil wealth and use it efficiently, he said.
“We believe that the decision will have a positive impact on our national economy and will enhance the competitiveness of the UAE as an economic power in the region and the world,” he said.
Mr Al Mazroui said the move would ultimately reduce fuel consumption and help to preserve natural resources for future generations.
It would also encourage individuals to adopt fuel-efficient vehicles, including the use of electric and hybrid cars.
The transport sector was responsible for 22 per cent of the greenhouse emissions in the UAE in 2013, amounting to 44.6 million tons of carbon dioxide.
He said the cost of petrol represented 3 per cent to 4 per cent of an average income in the UAE, which is a reasonable percentage compared with international costs.
Consequently, deregulating prices would not have a notable effect on individuals’ costs of living, he said.
A fuel price committee has now been set up to review fuel prices against average international levels before the new policy – which has been approved by the Cabinet – comes in to force next month.
Dr Matar Al Nyadi, undersecretary of the Ministry of Energy, will be chairman of the newly formed Gasoline and Diesel Prices Committee, on which the undersecretary of the Ministry of Finance, the chief executive of Adnoc Distribution and the chief executive of Enoc will also sit.
Dr Al Nyadi said the committee would focus on consumer protection issues and ensure that petrol prices were balanced according to international standards. The committee would announce on the 28th of each month prices for the following month, starting July 28 for August, with the decision being based on “average global prices with the addition of operating costs”.
The Ministry of Energy has assigned a dedicated number (056 546 7942) and email (fuelprice@moenr.gov.ae) for public inquiries about the new deregulated fuel prices.
We are committed to everything that can contribute to achieving sustainable development in the UAE and boosting economic growth
Saif Humaid Al Falasi chief executive of Emirates National Oil Company