Saudi Arabia has announced it will raise petrol prices by over 40% from Tuesday as the country made a decision to cut the subsidies range after reporting a budget deficit, an AFP report has said.
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Prices will also increase for electricity, water, diesel and kerosene under the cuts decided by the council of ministers headed by King Salman, the official SPA news agency reported.
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Spending this year came in at $260 billion, the ministry said, nearly equal to 2013 expenditures and down 6.6 percent from 2014.
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Riyadh projected a shortfall of $87 billion in next year’s budget, the first since King Salman took over in January.
Brent, the benchmark for more than half the world’s oil, is poised to end 2015 with the lowest annual average price in 11 years, hurting energy-exporting countries and companies.
“It’s very clear that Saudi Arabia will continue with its oil policy of defending its market share in 2016 as it prepared itself for low oil price environment”, said John Sfakianakis, a Riyadh-based economist and a former advisor to the government.
Income for 2015 was 15 percent lower than projections and 42 percent less than in 2014. The kingdom said that oil revenues, which make up 77% of the total revenue figure for 2015, are down 23% compared to previous year.
In Monday trading across the region, Dubai rose 0.5 percent, Abu Dhabi was up 1.0 percent, while Qatar closed unchanged. Lavish fuel subsidies, a vast public sector, lack of taxes and free-flowing government spending are luxuries state technocrats have long warned are unaffordable, but are seen as a right by many subjects because of the kingdom’s high oil output.
Saudi Arabia spends a big chunk of its cash on doling out generous benefits for its citizens, including cheap fuel.
Aramco, the national oil conglomerate said on twitter that all petrol stations will close with immediate effect on Monday till midnight, and will resume with new prices.
But unlike Alberta, which is an oil-price taker, Saudi Arabia can change its reality by changing course.
In its budget statement, the ministry said it would adjust subsidies for water, electricity and petroleum products over five years. The OPEC heavyweight shows no signs of wavering in the long-term oil strategy it has orchestrated since a year ago. The continued fall of oil prices has been attributed to Saudi Arabia-led OPEC’s unwillingness to cut production out of fear of losing market share, according to media reports. The kingdom usually spends more than it budgets for, as was the case in 2015 when it had planned spending of only 860 billion riyals.
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Revenues next year are forecast at 514 billion riyals, down from 608 billion riyals in 2015 – due to the plummeting oil prices.
