Saudi Arabia to increase fuel prices by 80%

Saudi Arabia plans to increase domestic gasoline prices by 80 per cent in January as part of its programme to gradually eliminate energy subsidies.

A source with knowledge of the matter revealed details of the Kingdom’s energy plans to Bloomberg. Gasoline prices are set to increase by about 80 per cent, while jet fuel prices will be raised to international levels in one go, the source said. Gasoline and other fuel such as diesel, kerosene and heavy fuel oil, will see incremental price increases over several years, the person said.

The hike will mean petrol will go up in price from 24 cents per litre to 44 cents. Prices are not expected to reach international levels until 2023 at the earliest and other fuel such as diesel, kerosene and heavy fuel oil will reportedly see incremental price increases over several years.

Read: Tillerson to Saudi: Be careful in your foreign policy

The measure is part of a wide scale reform planned by the Crown Prince Mohammed Bin Salman to overhaul the country’s struggling economy. The world’s largest oil exporter has had to take several austerity measures to lessen the impact of low oil prices. The Kingdom’s budget deficit expanded to 15 per cent of GDP in 2015 and its economic growth rate has come to a grinding halt at 0.03 per cent.

Bin Salman’s ambitious plan to eliminate government subsidies, however, will take longer than expected to come into fruition as the government tries to offset the impact of its reform measures on a struggling economy.

One of the proposals to offset the impact on low income Saudi citizens will be announced later today by the Ministry of Labour and Social Development. It’s reported that the ministry will publish details of a cash transfer programme, known as the Citizen’s Account. Officials have said that the payments, intended to compensate low- and middle-income Saudis for austerity measures, will begin before the next round of subsidy cuts.