UAE to save Dhs 9.1bn by slashing fuel subsidies

The United Arab Emirates is expected to save about Dhs 9.1bn through the deregulation of fuel subsidies, according to the country’s minister of energy.

The government provided fuel subsidies worth Dhs 9bn and Dhs 9.5bn in 2012 and 2013 respectively. But with the recent decree to deregulate fuel prices, the UAE government has managed to net significant savings, Suhail Al Mazroui said.

Despite the subsidy cuts, the fuel prices in the UAE are still among the lowest in the world among countries that have deregulated prices, he noted.

“Fuel prices in Europe are about four times those in the UAE even though we both deregulated prices. However, the difference is that the UAE doesn’t impose taxes on fuel prices whereas Europe does,” Al Mazroui said at an event in Abu Dhabi.

“The idea behind deregulating prices in the UAE was never aimed at saving money just for the sake of savings; most of this money will be pumped back into the economy in the form of investments on infrastructure, health, education, and other parts of the economy.”

Al Mazroui added that the withdrawal of fuel subsidies would also help make the economy more sustainable in the long run.

“Oil is not a renewable source, which means we’re going to run out at some point, and we don’t want our economy to fall just because we’ve run out of oil, which means we need to make some changes,” he said.

Earlier this month, Al Mazroui urged the UAE residents to be conservative about their energy consumption, calling for a 10 per cent cut in their energy use. He said that the UAE annually spent Dhs 35bn in subsidising power and water. However, an International Monetary Fund report that was published earlier this year indicated that the pre-tax bill was higher at Dhs 46.6bn.

With the fuel subsidy cuts, the UAE government is also hoping that higher prices would prompt residents to opt for measures such as carpooling and public transport or buy fuel efficient vehicles that could help cut emissions.

Al Mazroui said that there were three million cars in the UAE, out of which 638,000 are four wheel drive vehicles. He noted that about 23 per cent of these cars are owned by Emiratis, adding that it has become cultural norm among Emiratis to own big fuel-guzzling vehicles.

The energy minister said that through higher fuel prices the government is merely persuading citizens to consider their vehicles’ fuel efficiency and evaluate if they really need a car before they purchase one.