U.A.E. Removes Fuel Subsidy

With lower oil prices, the U.A.E. will have a fiscal budget deficit for the first time since 2009, according to the IMF.

The United Arab Emirates, the third-biggest OPEC producer, will link gasoline and diesel prices to global oil markets starting next month, becoming the first country in the oil-rich Persian Gulf to remove transport fuel subsidies.

Fuel prices will be deregulated as of Aug. 1, the Ministry of Energy said in a statement on Wednesday. Diesel prices will also be linked to global markets, and are initially expected to decline, it said.

Gasoline is now subsidized in the U.A.E., the second-biggest Arab economy and home to about 6 percent of the world’s oil reserves. Unleaded gasoline 98 octane in the U.A.E. sells for 1.83 dirhams (50 cents) a liter, according to prices on the ministry’s website. The U.S. price of premium unleaded gasoline is $3.18 a gallon, or 84 cents a liter, according to AAA, the biggest U.S. auto group. This is six times the rate of 16 cents in Saudi Arabia, the largest OPEC producer.

The U.A.E., which doesn’t impose income tax or measures such as value-added taxes, comprises seven sheikhdoms including Abu Dhabi and Dubai, Expatriates comprise about 80 percent of the country’s residents.

Budget Deficit

Energy subsidies will reach $5.3 trillion this year, with the U.A.E. at $29 billion and Saudi Arabia at $106.6 billion, according to an International Monetary Fund report in May. Qatar has the world’s biggest subsidies per capita at $5,995, compared with the U.S. at $2,177 and China at $1,652.