Ending fuel subsidies could be good for the UAE

By j

Currently the UAE spends $3.5 billion a year to subsidise pump prices, which are consequently among the lowest in the world, with petrol costing around $0.47 a litre. The government has now announced that this subsidy will end from July 28, to be replaced by a market related pricing policy linked to global levels, to be fixed monthly by the government, with a built-in margin for forecourt companies like Adnoc Distribution.

“The idea of liberating the market,” said Under-secretary at the Ministry of Energy Matar Al Nyadi, (who is also Chairman of the Gasoline and Diesel Prices Committee), “is that it is healthy to have an open market. It will help reduce consumption and bring more efficient use and encourage a more efficient type of car that will be introduced.”

However if the idea is to discourage automobile usage, it is unlikely to succeed, as for most car owners there is little alternative in the form of public transportation, and neither walking nor cycling is really an option. With oil prices at historic lows, the termination of subsidies at this time will have less impact than it would have had a couple of years ago. It will be when the prices firm that citizens and businesses will feel the pinch. Meanwhile there has been a cautious welcome from business leaders in the Emirates, who feel the change is a step along the road to a real-world economy, no longer artificially sustained by subsidies.

Share

Featured Articles

Abu Dhabi Airports prepares for Terminal A opening

A decade in the making, Abu Dhabi International Airport welcomes 6,000 volunteers to test operational readiness of stunning new Terminal A building

Business Chief expands portfolio with new look and coverage

Business Chief Middle East & Africa launches with fresh new look and extended coverage of the region, with exclusive executive interviews and insights

How Octopus Energy grew to become an industry giant

Octopus Energy continues to grow after a deal was agreed to acquire Shell Energy in the UK and Germany, taking its customer base to almost seven million

Perkbox CEO: How to support employees through tough times

Human Capital

How Middle East is embracing the future of digital finance

Corporate Finance

UAE Lulu Group shifts business for global growth and IPO

Corporate Finance