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UAE to deregulate fuel prices from Aug 1

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Abu Dhabi: The UAE government has decided to deregulate fuel prices in this gulf emirate with effect from August 1. As a result of this decision, diesel prices are expected to reduce, and petrol prices escalate, said a top official of the Ministry of Energy. Fuel prices will be announced on 28th of every month from the following month and will be linked to international petrol and diesel prices.

inner PetrolMatar Al Neyadi, Undersecretary of Ministry of Energy, said the decision will have a positive impact on the economy. “It will increase the competitiveness of the UAE economy and enhance the free market. We are very positive about it,” he said.

“Diesel prices will go down and petrol prices will increase little bit due to the decision. It will have a positive impact on the economy as the cost of goods will reduce due to decrease in diesel prices,” he said. It is not known to what extent prices will increase or decrease due to the latest announcement by the Ministry of Energy.

The increase in petrol prices on the other hand will discourage people from using their cars, he said. “It will be good for the environment as emissions will be reduced. Transportation sector is the second biggest source of green house gas emissions in the UAE,” he said.

According to him, it has nothing to do with the falling oil prices. “The UAE economy is strong and stable. Drop in oil prices has not affected the economy. The decision to deregulate fuel prices was under review for some time now.”

Earlier in the day, Suhail Al Mazroui, Minister of Energy, said that in accordance with the new pricing policy that has been ratified by the UAE Cabinet, a fuel price committee has been set up to review fuel prices against average international levels prior to their implementation in the UAE every month.

He said 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.”

Sachin Mohindra, a Portfolio Manager and senior vice president of Invest AD said, it will have a positive impact on the economy in the long run but in the short term it will have some impact on inflation.

“It is a good step towards further strengthening of the UAE’s already robust fiscal position and diversification of the sources of revenue for the Government.  Rationalisation of subsidies is good for the economy. It leads to transparency.”

“It is good for the industry if the diesel prices get reduced but petrol prices going up might increase the inflation even though it could be minor. We have to analyse to what extent the inflation will be increased due to the decision.”

The decision to deregulate fuel prices should not be linked to drop in oil prices, he said.

“Gradual rationalisation of subsidies was in discussion since from a long time even before oil prices went down in December last year. Even the rating agencies and financial institutions have been advising regional governments to relook at subsidy structure.”

 

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