Fuel subsidies believed not sustainable are abolished.

Most developing oil-producing countries have been subsidising fossil fuels for some time.

Cutting such subsidies is difficult, but necessary because they are depleting public budgets, setting the wrong incentives and contributing to global warming.  Many governments are afraid of triggering public protests, but recent experience shows that people accept reforms that are designed and implemented well.

Lining up

In the UAE, all fuel subsidies were abolished as of 1st August 2015 and will be priced based on the prevailing average world prices of petrol and diesel fuels.  The price of petrol increased by 24% and that of diesel fell 29% as an immediate result of the decision.

In all GCC countries including the UAE, roads are predominately populated with petrol cars and public transport, heavy goods and material movement run preferably on diesel fuel.

This is a timely good omen for the country’s construction sector, which in view of the recent oil prices fall, together with the industry in general is having some difficulty in keeping with the frantic pace of yesteryear.  This short-term drop in diesel prices will certainly lower operating costs for all transports fleets.

There are also other benefits such that the UAE as a pioneer of sustainability within the GCC region, could get credit for.  Green credentials through green building codes, eco-friendly transport initiatives, or more effective recycling practices, policy makers are doing all that they can to bolster the Emirates’ environmental awareness.

In Europe meanwhile and in developed countries generally, boasting superior fuel economy and lower car tax, diesels have been considered the obvious choice for frugal motorists since the first mainstream diesel-powered cars appeared in the early 80’s.  But it is harder to control pollution from diesels than from petrol cars, and for this reason, European standards for diesel exhaust have not been as strict as those from petrol cars.  And with manufacturers asking a premium for diesel models coupled with the development of super-economical petrol engines and cheaper petrol prices, is diesel still the answer to cheaper motoring?