Tumbling oil prices may be a worry for the UAE economy, but at least there’s an upside for motorists after fuel pricing was liberalised last month.
The new regime was announced late in July and the first floating prices for petrol and diesel took effect this month.
The government hasn’t yet given full details of how the new system works but it has said its new price-setting committee will take an average of daily “international benchmark” prices for petrol and diesel and add a fixed mark-up for Adnoc and Enoc, the country’s dominant retail distribution companies.
There are a wide variety of benchmark prices the committee might refer to, but they all have one thing in common: they’ve been falling sharply the last month.
The government initially raised petrol prices by 24 per cent to Dh2.14 a litre for August, and lowered diesel prices by 29 per cent to 2.05 a litre.
September’s petrol and diesel prices should be announced this week, and consumers can expect prices for both to be lower.
Taking New York’s actively traded futures for wholesale petrol and diesel prices as an indication of how much prices have fallen, petrol prices are down 14 per cent since the beginning of July, with the cost in August so far averaging 9 per cent below July’s average. Diesel prices are down 16 per cent, with average prices down 8 per cent.
What’s more, the end of the summer “driving season” in the US and European markets means those benchmark prices are set to fall in months to come, if forward futures prices are an indication.
“Certainly, the outlook on fuels prices over the next few months is bearish,” said Emma Richards, oil and gas analyst at BMI Research.
She notes that fuel prices are driven mainly by oil prices, which have been declining sharply amid signs that growth in oil demand from China may soften in line with its economic slowdown. But petrol and diesel markets, too, are “increasingly saturated”, she said, as inventories have risen worldwide, putting more pressure on fuel prices.
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