UAE has announced that it would deregulate petrol and diesel prices in a major reform expected to save the government billions of dollars.
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Global oil prices have remained fairly low for most of this year, which should be good news for people in most of the industrialized world.
The Ministry claimed that the decision is in line with the strategic vision of the UAE government and will help diversifying its source of income, strengthening of economy and increasing its competitiveness.
Al Mazroui added that the move will have environmental benefits, will preserve natural resources for future generation and encourage the use of fuel-efficient vehicles, and electric and hybrid cars, as well as public transport.
Global oil prices have dropped nearly 50 per cent in the past year to US$56.57 a barrel today as increased production from the Middle East to the U.S. swelled supplies, leaving a global surplus.
“There was no reason to subsidize in a country that is as rich as the UAE”, said Nasser Saidi, former chief economist at Dubai worldwide Financial Centre and head of Nasser Saidi and Associates. Even before this deregulation, petrol prices in the UAE were the least regulated in the GCC, with drivers in Saudi Arabia paying about one third of our pump prices. Diesel prices will also be linked to global markets, and are initially expected to decline, it said.
The Minister said: “Considering the worldwide prices of oil and petroleum derivatives, we expect diesel prices to go down”.
Gasoline is now subsidised in the UAE, the second-biggest Arab economy and home to about 6 per cent of the world’s oil reserves. Consequently, deregulating prices would not have a notable impact on individuals’ costs of living, he said.
Gas prices in the Emirates, a seven-state federation where foreign guest workers far outnumber locals, are already higher than those of its Gulf Arab neighbors.
Al Mazroui elaborated that the decision will contribute positively to the UAE’s investment environment, enhance its economic competitiveness, and support the policy of a free-market economy with no direct interference from the government.
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In terms of personal consumption, he said the cost of petrol typically represents 3%-4% of the average income in the UAE, which is a reasonable percentage compared to worldwide averages. On the 28th of each month, the committee will announce the prices for the following month.
