Energy reform is a price worth paying

Oil above $75 a barrel is good for Middle East economies but a challenge for the region’s energy reformers and consumers. Slumping prices had triggered a wave of new policies over the last four years to slash subsidies on petrol and electricity, while boosting investment into renewables. Maintaining the momentum behind energy market liberalization is essential for future prosperity. Previously, the region’s consumers were insulated from higher oil prices by generous state subsidies, which were costly to maintain and encouraged waste. The UAE opened the flood gates three years ago by introducing a new pricing model for gasoline and diesel in August 2015, when a barrel of Brent crude was trading at $54. Since then a fuel committee has set gasoline prices based on a monthly review of global averages and operating costs instead of historically unsustainable subsidies. At the time, a liter of 98 octane petrol bought at a filling station on Sheikh Zayed Road would cost Dh1.83. Today, the same quantity of fuel will cost motorists Dh2.63, up 44 per cent from the subsidized rate. Despite concerns voiced by the region’s consumers, the UAE’s example was quickly followed by many Arabian Gulf neighbors. Oman’s Ministry of Finance revealed… continue reading

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Source: CTRM Center

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