The decision of some Gulf states to hike petrol prices in the local market to cope with the deep slump in the global energy prices is both timely and economically savvy. Petrol prices in our region are amongst the lowest in the world and this fact makes the hikes announced by the governments very modest, and not at all a burden to the residents. For example, Saudi Arabia has raised domestic energy prices by as much as 50 percent after the world’s leading oil producer announced a record $98bn budget deficit on Monday due to rock-bottom global petroleum prices. The price of higher-grade unleaded petrol rose to 0.90 riyals ($0.24) per litre from 0.60 riyals, a hike of 50 percent. Lower-grade petrol rose to 0.75 riyals from 0.45 riyals per litre, up two thirds. Even after this seemingly steep increase, petrol is very cheap in the kingdom and the increase is unlikely to cause inflation and create a burden to the residents. Bahrain and Oman too have approved a new pricing system for diesel and kerosene that is set to begin in January. The new pricing system is expected to result in a ‘gradual increase’ in the cost of both fuels to domestic customers in the coming years, as Bahrain adjusts its prices to reflect expected rises in other Gulf Cooperation Council (GCC) states, the state news agency BNA reported.
The Gulf countries are adopting various measures to readjust their economies to the changing global energy market dynamics. High energy prices had enabled these countries to adopt a welfare system which the rest of the world couldn’t dream of, which its citizens and residents have become used to over decades. The current global oil prices will make it difficult for energy producing countries to continue these subsidies. But the Gulf countries have been able to absorb the shock from the rock-bottom prices due to their robust economies and their huge reserves.
Brent crude oil retreated towards 11-year lows yesterday. Benchmark Brent, near $37 per barrel, traded just one dollar away from those lows reached last week as the primary supportive factor, an expected cold snap in Europe and the United States, was forecast to be shorter than expected. Energy experts are not very optimistic about the direction of prices next year. It’s for this reason that producer countries are taking measures to cushion the adverse impact.
The Gulf countries can overcome the economic impact of low oil with some austerity measures. At the same time, the impact of these measures will be modest and will not upend their existing living standards. Global economies pass through various cycles and governments and citizens usually get accustomed to the ups and downs.
The decision of some Gulf states to hike petrol prices in the local market to cope with the deep slump in the global energy prices is both timely and economically savvy. Petrol prices in our region are amongst the lowest in the world and this fact makes the hikes announced by the governments very modest, and not at all a burden to the residents. For example, Saudi Arabia has raised domestic energy prices by as much as 50 percent after the world’s leading oil producer announced a record $98bn budget deficit on Monday due to rock-bottom global petroleum prices. The price of higher-grade unleaded petrol rose to 0.90 riyals ($0.24) per litre from 0.60 riyals, a hike of 50 percent. Lower-grade petrol rose to 0.75 riyals from 0.45 riyals per litre, up two thirds. Even after this seemingly steep increase, petrol is very cheap in the kingdom and the increase is unlikely to cause inflation and create a burden to the residents. Bahrain and Oman too have approved a new pricing system for diesel and kerosene that is set to begin in January. The new pricing system is expected to result in a ‘gradual increase’ in the cost of both fuels to domestic customers in the coming years, as Bahrain adjusts its prices to reflect expected rises in other Gulf Cooperation Council (GCC) states, the state news agency BNA reported.
The Gulf countries are adopting various measures to readjust their economies to the changing global energy market dynamics. High energy prices had enabled these countries to adopt a welfare system which the rest of the world couldn’t dream of, which its citizens and residents have become used to over decades. The current global oil prices will make it difficult for energy producing countries to continue these subsidies. But the Gulf countries have been able to absorb the shock from the rock-bottom prices due to their robust economies and their huge reserves.
Brent crude oil retreated towards 11-year lows yesterday. Benchmark Brent, near $37 per barrel, traded just one dollar away from those lows reached last week as the primary supportive factor, an expected cold snap in Europe and the United States, was forecast to be shorter than expected. Energy experts are not very optimistic about the direction of prices next year. It’s for this reason that producer countries are taking measures to cushion the adverse impact.
The Gulf countries can overcome the economic impact of low oil with some austerity measures. At the same time, the impact of these measures will be modest and will not upend their existing living standards. Global economies pass through various cycles and governments and citizens usually get accustomed to the ups and downs.
