The government of Saudi Arabia could increase its prices for domestic gasoline by as much as 30% starting in July, said industry sources. This is part of a reform plan by the top exporter of oil in the world to align the prices of fuel in the country, with benchmark global levels.
During December of 2015 Saudi raised prices of its 95 octane gas from SAR0.60 per liter to SAR0.90 ($0.24).
However, that kept the kingdom amongst the nations with the least expensive gasoline anywhere in the world.
The government wants to now increase prices for domestic fuel to reach a par with that of international levels by the start of 2020. This move is part of the reforms that ease the burden of subsidies on the government finances, and will drive efficiency of energy and cut overall consumption.
Simply put a 30% increase is the number everyone has spoken about. Two industry sources have also confirmed a rise of 30% was on the table. Another source said the final decision still had not been made on what the exact increase would be or how it would be done.
There could be a change to the date or the amount of increase in the price to stay in line with financial burdens the kingdom’s citizens might shoulder, said one source.
The Ministry of Energy in Saudi Arabia did not give a response to requests for comments.
Khalid al-Falih the Energy Minister said gasoline prices would be tied to one benchmark price.
Analysts have said that the kingdom, the Gulf region’s largest economy will likely follow mechanisms used by the United Arab Emirates and tie the domestic prices for fuel to international prices.
As the Saudi government attempts to curb consumption it calls wasteful, the increase in fuel price is tied to a government aid program of The Citizen Account, where cash handouts will be distributed to low as well as medium income citizens of Saudi Arabia.
Polices as well as measures will be decided by a committee at the ministerial level made up of the ministers of finance, economy, labor and planning for the special Citizens Account prior to May 1, announced the general supervisor of the Citizen Account.
A growth in demand said analysts for motor fuel has not dropped during 2016 following the rise in December 2015 but it has slowed.
However, it is not clear if this was from a higher price at the pump or an economy that has slowed, said an analyst in the industry.