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UAE petrol prices lowest in 11 months: How reduction will boost residents' savings

The recent interest rate hikes have also resulted in bringing down further inflation which had spiked earlier this year

The UAE on Friday substantially reduced retail fuel prices for the month of January 2023 which will boost disposable income for residents, improve the purchasing power of residents and bringing down costs for logistics and transport companies.

Starting January 1, Super 98 will cost Dh0.52 or 15.7 per cent less than December at Dh2.78 per litre. Similarly, Super 95 will cost Dh2.67 per litre in the first month of the new year, down by 16 per cent or Dh0.51. Whereas, E-Plus will cost 16.7 per cent less at Dh2.59 per litre.

The cut in rates brings petrol prices to the lowest level in 11 months. The January 2023 rates for 95-octane are cheaper by over 43 per cent in the UAE than the global average.

Reduction in fuel prices lowers transportation costs which in turn brings down prices of consumer goods. In addition, the recent interest rate hikes have also resulted in bringing down further inflation which had spiked earlier this year after the Russia-Ukraine crisis and surge in crude oil prices.

Inflation in the UAE is already among the lowest in the world and is likely to fall further in 2023, Abdulla bin Touq Al Marri, Ministry of Economy, said in early December.

“We have seen the last six months of global turbulence. But it’s the UAE’s agility that puts it on the global map. Inflation in the first nine months was 5.5 per cent, one of the lowest in the world. We are looking at inflation going down further next year,” the minister said.

Issam Kassabieh, a Dubai-based independent consultant, said the reduction in fuel prices will support the increase of citizens’ and residents’ disposable incomes which can be redirected towards other purchases.

“Commercially, this would support businesses that rely heavily on transportation and logistics. Overall, the reduced fuel price will support softening the impact of the observed inflation. In general, the prices of energy products such as fuel can have a significant impact on the overall level of consumer prices, as they are a major input in the production of many goods and services,” said Kassabieh.

Atik Munshi, managing partner, FinExpertiza UAE, said energy prices impact all sectors of the economy in one way or the other.

“A reduced fuel price will help control costs for residents and companies. This also acts as a ‘feel good factor’ for individuals as savings immediately [cause a] surge [of] dopamine for many. A reduction in fuel would reduce the overall costs and thus inflation impact can be muted at least to some extent,” said Munshi.

He added that for an industry like logistics or aviation, for which fuel is a major cost of operation, any reduction in petrol price reduces the operating costs.

“The saving of more than 15 per cent on Super fuel is significant. Many economies around the globe subsidise fuel and energy prices in order to promote indigenous sectors which would help such companies to be more competitive. With the advent of corporate tax in UAE, we hope to see such measures with more fervour,” added Munshi.

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