UAE hikes petrol prices by over 24%

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The UAE on Tuesday made foray into the new era of zero-subsidy regime for fuel prices in Gulf Cooperation Council by announcing new prices for August.

A high-powered committee, chaired by Dr Matar Al Nyadi, Undersecretary of the Ministry of Energy, disclosed the new fuel prices to be effective from August 1.

As per the information released on the Ministry of Energy website, unleaded gasoline 95 Octane rose 24.41 per cent from Dh1.72 per litre to Dh2.14 per litre. Similarly, 98 Octane new rates reached at Dh2.25 per litre from Dh1.83 per litre, reflecting an increase of 22.95 per cent while E-Plus 91 prices recorded highest rise in prices as it climbed 28.57 per cent from Dh1.61 per litre to Dh2.07 per litre.

Al Nyadi said that the reduction of diesel prices for August will serve as a stimulating factor for the economy. This will enhance the competitiveness of the national economy, reduce the prices of commodities and eventually reflect positively on the economy.

He added, "The ministry has coordinated with all relevant entities in the country including the Ministry of Economy and the Supreme Committee for Consumer Protection to monitor the movement of prices and safeguard the rights of consumers. This will ensure that people across the country benefit from lower diesel prices, which would mean lower operating costs for a wide number of vital sectors such as industry, shipping and cargo.

"As for the increase in gasoline prices, the impact on individuals will be minimal as the prices for cars with 4 cylinders will increase on average by nearly Dh18, for 6 cylinder on an average by nearly Dh25 and 8 cylinder by Dh45. Such an increase would not create an additional burden on car owners with limited incomes. Additionally, it will promote rationalised consumption and incentivise people to choose most fuel efficient cars, while curbing the increase in the number of cars on the country's roads in the future."

Last week, the Ministry of Energy announced that fuel prices would be deregulated and would be linked with average global moil prices, with the addition of marketing and distribution costs.

Petrol price hike to burn savings

The announcement had brought mostly negative reactions from local residents.

One resident, Azhar Zia Ur-Rehman, said he was worried that rising petrol prices will remove some of the incentives for foreigners to live and work in the UAE.

"The main reason for living here is the savings. Most people may reconsider if savings are hurt," he said.

Basit Aman, a 37-year-old lifelong resident of Dubai, said he thinks the move will primarily disadvantage the UAE's low-income residents.

"It's not fair on people with low income and get a car with their savings," he said. "Then it gets difficult for them to arrange for petrol with the increase." (READ MORE)

Oil companies give thumbs-up

Abu Dhabi's oil marketing and distribution company Adnoc Distribution welcomed the deregulation of oil prices.

"We support the decision liberalising the prices as it will help rationalise fuel consumption, conserving the environment and protecting natural resources for generations yet to come," said Abdullah Salem Al Dhahiri, chief executive officer (CEO) of Abu Dhabi National Oil Company or Adnoc.

"The decision to deregulate the prices of fuel in the country with effect from August 1, and endorse pricing mechanism as per the international prices of gasoline and diesel will give us an opportunity to upgrade the standard of our services," he said. "It will also help us continue our policy which is based on investment and expansion in building full-fledged service stations," Al Dhahiri said. (READ MORE)

Subsidy to benefit the economy

Top economists have welcomed the deregulation of petroleum prices, saying it would allow the government to channel funds away from wasteful inefficient subsidies into productive investments, infrastructure spending, education and healthcare. Such spending would boost economic growth, improve the UAE's global competitiveness and bring in foreign direct investment, they said.

Carla Slim, an economist at Standard Chartered Bank in Dubai, said subsidies reforms will allow the government to allocate more funds for capital expenditure and to keep supporting the economy.

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