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Construction firms set to benefit from end of UAE fuel subsidies

Deregulation of fuel prices on August 1 is expected to see diesel costs fall, while petrol is tipped to rise

PHOTO: Petrol prices are set to rise slightly in the UAE, but the cost of diesel is expected to fall following the deregulation. Credit: Shutterstock

Construction companies in the UAE stand to benefit from lower diesel prices, after the Ministry of Energy announced it was removing fuel subsidies from August 1.

While petrol prices are set to rise slightly because of the deregulation, the cost of diesel is expected to fall, ministry officials have said.

That is set to provide a fillip to sectors that rely on diesel, said Suhail Al Mazroui, the UAE’s Minister of Energy, according to a notice on the ministry’s website.

“Considering the international prices of oil and petroleum derivatives, we expect diesel prices to go down. This will stimulate the economy as [a] lower diesel price would mean lower operating costs for a wide number of vital sectors like industry, shipping and cargo among many others,” he said.

Al Mazroui said he expected the move to end subsidies would help make the UAE’s economy more competitive.

“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.”

Petrol prices are likely to rise, but with the fuel representing 3% to 4% of an average income in the UAE – “a reasonable percentage compared to international costs” – deregulating prices would not have a notable impact on individuals’ costs of living, said the minister.

Al Mazroui said the move would encourage individuals to adopt fuel-efficient vehicles, including the use of electric and hybrid cars, and encourage greater use of public transport.

New pricing will be reviewed monthly, with uniform diesel prices in all the emirates.

According to Matar Al Nyadi, Undersecretary of the Ministry of Energy and Chairman of the Gasoline and Diesel Prices Committee, on the 28th of each month, the committee will announce the prices for the following month.

In line with this decision, prices of gasoline and diesel for August will be announced on Tuesday 28 July, based on the average global prices with the addition of operating costs.

The committee will also urge distribution companies to increase their operational efficiency to lower their costs, and eventually positively impact the prices of gasoline and diesel at petrol stations, said Al Nyadi.

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