The Ministry of Energy announced today (Wednesday, July 22) that fuel prices in the UAE will be deregulated, reports state news agency WAM.
What this means, essentially, is that the price of fuel in the UAE will now be linked to global prices.
The new pricing policy will be put to action from August 1, 2015.
According to WAM, the decision is to support the national economy, hoping to lower the fuel consumption in the UAE, protect the environment and preserve national resources.
Suhail Al Mazroui, Minister of Energy, stated that the new pricing policy has been approved by the UAE Cabinet and a fuel price committee has been set up to review prices against international scales before they are implemented in the UAE every month. The committee – chaired by the undersecretary of the Ministry of the Energy – includes the undersecretary of the Ministry of Finance, the CEO of ADNOC Distribution and the CEO of Emirates National Oil Company, WAM explains. This committee will meet on the 28th of each month, where they will monitor global prices and announce the prices in the UAE for the following month.
“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. 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,” explains Al Mazroui. “This step will put the UAE on par with countries that follow sound economic methodologies. It is also anticipated to improve the UAE’s competitiveness while positioning the nation on international indices.”
This decision will not only encourage the use of public transport, but will also increase interest in the use of electric cars and encourage more residents to walk or cycle to work.
According to Reuters, domestic fuel prices in the UAE are currently among the lowest in the world because of heavy state subsidies. Allowing prices to move more freely will reduce pressure on the state budget and could be ‘one of the UAE’s biggest economic reforms in recent years’.
“Considering the international prices of oil and petroleum derivatives, we expect diesel prices to go down. This will stimulate the economy as lower diesel price would mean lower operating costs for a wide number of vital sectors such as industry, shipping and cargo, among many others,” Al Mazroui tells WAM.
The Minister continues to explain that the cost of gasoline represents three to four per cent of an average income in the UAE and, with the move to deregulate prices, this would not have a notable impact on individuals’ cost of living in the Emirates.