Low fuel prices in UAE to help households
New rates set to ease inflation in UAE; oil is likely to average $45 in 2016.
Motorists and households in the UAE relieved on Friday as fuel prices have dropped to their lowest level in five years that will also help ease inflation in the country.
Starting from January 1, the diesel rates at Dh1.61, Super 98 at Dh1.69 and Special 95 at Dh1.58 per litre are at their lowest level since 2011 following the announcement of the Ministry of Energy last week.
Last July, the UAE government introduced the de-regulation policy for gasoline and diesel by scraping the government subsidy. The new pricing policy is linked to global oil prices.
The first price adjustment, which was around a quarter per cent rise, worried the motorists in the country but now the fifth consecutive downward revision under the new policy brings relief to all private car owners and commercial vehicles' owners.
"Oil prices are sustaining downward trend since September and its a great relief to motorists," said Waseem Ahmed, a Dubai resident who drive Nissan pathfinder.
Falling fuel prices also helped brought down inflation in the country. The latest data shows that inflation across the UAE dropped to 3.5 per cent in November 2015 compared to 3.7 per cent in October and 4.43 per cent in July 2015.
During 2016, UAE consumer price index (CPI) is expected to be three per cent, 3.25 per cent and 3.6 per cent considering the oil price at $45 per barrel, $55 and $65, respectively, according to National Bank of Abu Dhabi (NBAD) senior economist Alp Eke.
"In my opinion the 2016 Brent average will be around $45 in 2016," Eke told Khaleej Times. Oil sector used to generate 65 per cent of government revenues in 2014, but with the decline in oil prices oil sector is expected to generate only 50 per cent of the government revenues in 2015.
The UAE government's oil sector weight in GDP is expected to reach 21.64 per cent at $45 oil price compared to 42 per cent in GDP contribution in 2013 and 24.62 per cent in 2015. Break-even oil price would be $70.36 at $45 global oil price.
Atik Munshi, managing partner at Horwath Mak, said that oil prices peaked after 2008 to touch about $140 per barrel and by the end of 2015 the price has fallen to less than $40 per barrel.
"During this same period, the oil exporting country like the UAE saw an inflation rate of around 13 per cent and now it dropped to less than four per cent after the deregulation of fuel prices," he said.
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