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Why higher petrol prices are good for the UAE

Why higher petrol prices are good for the UAE

Further hikes in fuel costs would make public transit more attractive and have additional benefits down the road, says Katherine Azmeh.

April 25, 2010 12:04 by

This isn’t going to be a very popular suggestion – especially not in the car-loving Emirates. But like it or not, there is a very serious argument to be made for the UAE government hiking the cost of fuel sold on the domestic market.

The price of both petrol and diesel was raised by 11 percent earlier this month, although fuel costs still remain far below international averages. The increases were an attempt by the government to reduce the burden of fuel subsidies on some oil companies. Dubai’s major refiner, ENOC, says that it loses money on domestically sold petrol whenever crude prices exceed $45 a barrel, and economists warn that consumers are wasteful when prices are excessively low.

Clearly, an 11 percent price hike is far from outrageous, but the extra few fils per liter might just be the incentive needed to get the ball rolling in a gradual upward movement in fuel prices. Many drivers will see this as both inevitable and undesirable – but higher prices will have strong benefits, too.

For government subsidies represent a burden on the economy and encourage wasteful consumption. Rising petrol prices would reduce the impact of this, but also offer another happy outcome: It would encourage residents to use public transport, and help diversify the economy.

In the same way that Cuba makes serious money by exporting all those legendary Montecristos, perhaps the UAE government envisions its relation to oil in a similar light: reducing domestic reliance, as it profits from its sale on the world market.

The government should wean the public off petrol subsidies and begin the gradual upward correction in petrol prices. At the same time, UAE residents should begin rethinking their transportation habits and avail themselves of the comfort and affordability of the existing and planned mass transit systems.

Dubai Metro is a shining example of forward-thinking city planning. The multi-billion dollar system can help address the transportation needs of Dubai’s growing population, serving visitors, reducing traffic congestion, and preserving the great lifestyle that residents enjoy.

Failure to incentivize the public towards embracing such transit systems will impact negatively on tourism, quality of life, fiscal responsibility, oil company solvency, and environmental stewardship.

And if you need more convincing, consider a visit to Beirut. Access to well-run, organized and affordable mass transit would be transformational for the quality of life in an otherwise lovely city.

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  1. Ahmad on April 26, 2010 1:14 pm

    Sorry, but the writer is way off from the reality of Dubai.

    1) “comfort and affordability of the existing and planned mass transit systems”

    Is this a spoof letter? Does any senior govt or corporate executive use public transport?
    Only Dubai has a Metro, that too is time consuming unless going from 1 station to another.
    Try using buses in Abu Dhabi, most of them packed in peak hours with sweaty men staring and leering at females……

    2) Weather, weather, weather

    Dubai is not Beirut, nor is it Singapore. Day time temperatures remain 35 C + for 5 months of the year, often with 70%+ humidity.

    That is one of the main reasons why public transport isnt feasible for many people.

    3) Economists seem drop out of planes from Singapore or Turkey and then proceed to call fuel prices “excessively low”. Have they ever been to Saudi Arabia or Qatar or the other GCC states where the prices are, shock, horror, even lower?

    Why compare fuel prices in an oil exporting country with countries that have to import all their oil ?

    Are cherries here the same price as in Syria ?

    Colombian tamarillos are sold here for 58 dhs a kilo, should all Colombian start charging high prices for something they grow citing high prices in the UAE?

  2. Mark on April 28, 2010 9:23 am

    Hi Ahmad,
    Thats the way to go.
    They are just triing to pacify the people here.
    Public transport doesnt work here because of the heat.
    Does a car owner sell his car and start using public transport?
    I have used the buses in Dubai and the service is no good in far out areas.
    How does one reach Dubai Land or Marina without a car.

    I think they need to revisit this idea of theirs.

  3. jazzy jo on April 29, 2010 8:58 am

    What is this baseless article? Does really RTA & Dubai Traffic Dept wants us to sell our cars & just use the public transportation sysyem whch still
    does not cover an extensive part of town. Does RTA & Dxb traffic Police really want to
    loose revenues on Salik (which I’ve been told is about 5 million or used to be)
    car registration fees, radar fines, police fines (remember an article a few days ago that has now
    given all policemen the right to issue fines), parking fees & fines, etc… Imagine how many revenues & jobs will be
    lost ( yes UAE nations included too) I don’t think so!

  4. Marina on May 3, 2010 6:35 am

    It would be a joy to read articles where authors have written after thorough research on the subject covered.

    Undoubtedly there is vast improvement in the mass transit system that Dubai offers. However, the metro does not run 24×7. I learned the other day that from the airport the C1 route alone offers 24 hour coverage (route covers parts of Deira stopping at the Bur Dubai bus station). Ms. Azmeh seems to have missed the point that the city expansion is in the other direction. Or are residents and tourists alike expected to stop over in that part of the city they are in until the mass transit system begins the following day?

    That’s an interesting thought!

  5. Sushikl Kumar on May 20, 2010 9:01 am

    Ridiculous write up!

    Emanating, typically, from someone in an armchair with little or no foreseeable impact from the sugestion made.
    The Metro is still just a line and not a network as yet. Getting to and from stations is still a task for most rsidents. 35C + daytime temperatures prevail for 4 months a year and 40C+ for another 5!
    Road transport (read cars) are still indispensible in this country and any more signifficant price rise in petrol will play havoc with the cost of already high living.
    Kipp should not allow such flippant views a forum!

  6. Miss Anne Thropic on May 20, 2010 11:27 am

    The rise in the price of petrol is totally affordable for most people here and we cannot forget that the oil won’t last forever so any push towards public transport (yes, it’s hot. Bring a spare shirt, deal with it, what are you going to do? more fuel-efficient cars should be welcomed.

    Also, money needs to be invested more heavily in alternative fuel cars so that we can still enjoy the convenience of cars long after the oil runs out.


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