Saudi to increase oil prices by 80%

Saudi Arabia is planning to increase domestic oil prices by 80 per cent as early as this November in its ongoing effort to curtail government spending spurred by the oil price slump two years ago.

According to Bloomberg, the Kingdom will phase out its oil subsidy to bring prices roughly in line with international rates, which will see the cost of a litre of oil jump from $0.20 cents to $0.36 cents.

Citing a person with knowledge of the matter, the report said that Saudi authorities will make a final decision on the plan by October.

The decision to cut government subsidies for oil could not come at a worse time. It is a very unpopular decision and the Saudi authorities are reluctant to take this step at this moment in time while facing challenges at home and abroad.

The sale of stakes in the country’s most lucrative asset, Aramco, and cuts in government subsidies are vital to the country’s social and economic regeneration, planned in its 2030 vision. While Riyadh needs to make significant savings by reducing government spending, sensitivities over cuts to energy subsidies prompted ministers to delay a hike in gasoline prices in July.

Read: Saudi Arabia cuts oil export as Aramco sale looms

Further delays to cuts in government subsidies will not come as a surprise as security officials in the country deal with low level unrest. An 80 per cent hike in oil prices will hit most of the country’s population very hard and may push millions of people to the edge. While additional subsidies for middle and low income families will be introduced to reduce the impact of austerity measures, this unpopular decision may cause further anger and resentment in the country.