The UAE’s Ministry of Energy has announced that it will deregulate fuel prices in the country starting August 1, 2015. Petrol and diesel prices in the country have been heavily subsidized, with pump prices remaining constant, despite fluctuations in the global crude oil market.
The move has been in the works for some time now. International agencies, such as the International Monetary Fund (IMF) and the World Bank, discourage fuel subsidies as they dis-incentivize consumers to save; more importantly, fuel subsidies have become a huge budgetary burden for many countries that offer them, especially when oil prices spike. In January 2015, the Supreme Council of Energy had submitted recommendations to the Ministry of Energy to gradually reduce these fuel subsidies.
“The decision to deregulate fuel prices has been taken based on in-depth studies that fully demonstrate its long-term economic, social and environmental impact,” said Energy Minister Suhail bin Mohammed Faraj Faris Al Mazrouei.
“The resolution is in line with the strategic vision of the UAE government in diversifying sources of income, strengthening the economy and increasing its competitiveness in addition to building a strong economy that is not dependent on government subsidies.
“This step will put the UAE on par with countries that follow sound economic methodologies, “ he said.
He added that the move “will improve the UAE’s competitiveness while positioning the nation on international indices.”
The cost of gasoline represents 3-4% of an average income in the UAE, he said. Consequently, the move is not expected to have a big impact on the cost of living of UAE residents.