UAE raising petrol prices, heading for liberalization

Monday, 19th April 2010

The price of gasoline sold in the United Arab Emirates is set to increase by 11% from 21 April. The move is likely to be the first of many, as the government seeks to address a costly disparity between the subsidized rates paid by the local population and the production costs paid by producers.

In common with other countries in the region, the UAE uses subsidized rates for utilities and commodities like petrol as a way to redistribute money earned from oil to the local population.

However, the producers and distributors of petroleum products suffer under this regime. The government-set price is lower than that needed to break even. In order for Emirates National Oil Co., to break even, gasoline prices need to be at around 40-45 dollars per barrel.

From 21 April, the government-set retail price of 95-octane petrol will increase by 15 fils per litre. The current price per litre of 1.37 dirhams equates to £0.24. In March, the average price for 95-octane petrol in the UK was £1.16.

In 2009, a barrel of oil cost an average of $62 per barrel. Despite a number of factors weighing on the market, oil still traded at over $80 per barrel today.

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