Despite price volatility in the global crude oil price movement, the gasoil and fuel oil market will continue to grow in the UAE due to its less reliance on hydrocarbon and the continued activities in the construction, transport, logistics, infrastructure and industrial development.
Abu Dhabi - The government announcement on Wednesday has been appreciated by economists, businesses and other stakeholders who say it aimed at sustainable economic growth and development.
Published: Fri 24 Jul 2015, 12:00 AM
Updated: Fri 24 Jul 2015, 9:31 AM
The deregulation of petroleum prices will support the economy and help consolidate government finances.
The government announcement on Wednesday has been appreciated by economists, businesses and other stakeholders who say it aimed at sustainable economic growth and development.
A leading oil trader, Sheikh Mohammed Sharif, who is chairman of Directions Fuel Trading and Khushi Group, said the landmark move which is market-linked, "will obviously look into the social and economic implications," inflation and other factors while reviewing the monthly prices of gasoline.
The known trader in diesel and fuel welcomed the move which will help UAE residents to become more conscious of the environment and encourage them to use public transport. The move comes at a very convenient time as global oil price remains at a very low level, Sharif said. Any rise in crude prices in future would impact the oil prices which could encourage informal cross-border fuel trade with the regional countries. "However, as long as the current low crude price sustains, consumers will be better off with the new pricing mechanism," said Sharif.
Despite price volatility in the global crude oil price movement, the gasoil and fuel oil market will continue to grow in the UAE due to its less reliance on hydrocarbon and the continued activities in the construction, transport, logistics, infrastructure, and industrial development - the main sectors that consume fuel oil and gasoil.
On its impact on oil trade, he said: "We are confident about the recovery of the oil price and the long-term sustainability of the UAE economy as well as the fuel trading sector."
Welcoming the policy initiative, Michael Armstrong, regional director of Institute of Chartered Accountants in England and Wales, said the move will discourage fuel consumption, protect the environment and preserve national resources. The regional director said that the deregulation should support the national economy in the longer term whilst also helping consolidate government finances. The UAE has chosen the right period to adjust oil subsidies, he said.
As ICAEW's recent Economic Insight report noted, removing subsidies during a period of subdued global oil prices should mean the inflationary impact will be felt less sharply, Armstrong said. The more so as consumer protection is a stated focus of the new fuel price committee, he said. "However, even though prices should not shift dramatically in the immediate future, the knowledge that households and businesses alike will no longer be isolated from global oil prices through government spending should influence behaviour."
Households will start to think about how they can reduce their reliance on fossil fuels in case of future price hikes, the regional director said.
- haseeb@khaleejtimes.com
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