Qatar to Reduce Subsidies, Fuel Prices Will Fluctuate Monthly

This post was originally published on 26 April 2016.

Qatar will allow its domestic gasoline and diesel prices to fluctuate in response to changes in global markets as it seeks to reduce waste of fuel and save money for the state budget.

Currently, local fuel prices are fixed at low levels, requiring the government to spend on subsidies to keep them down. From next month, prices will fluctuate monthly, the official Qatar News Agency (QNA) said on Tuesday.

Monthly prices based on a new formula

Future prices will be based on a formula that includes global levels, production and distribution costs within Qatar, and prices elsewhere in the region, QNA said without giving further details of the formula.

Monthly prices will be published by the end of each month on the ministry’s official website and in all local newspapers but will be enforced as of 12:01 am on the first day of each month, starting May 1.

According to the Ministry of Energy and Industry, the fuel price in Qatar in May would be as follows: gasoline (super 97) QR1.30/litre, gasoline (premium 90) QR1.15 and diesel QR1.40.

This means the gasoline price next month would remain the same as of now.

In January, Woqod had announced a revision in fuel prices, the first one in five years.

Low export strains state budget

Qatar’s state budget has been strained as low international oil and gas prices have slashed its export revenues, so it has been looking for ways to save money.

Sheikh Mishaal bin Jabor al-Thani, chairman of a government-led commission studying the issue, told QNA on Tuesday that the new system would not necessarily mean higher domestic prices, but that they could now rise and fall when global levels moved.

Subsidy cuts by other Gulf countries

Other Gulf countries have implemented or are considering such a reform as low oil prices pressure their finances.
As part of belt-tightening plans, the United Arab Emirates eliminated fuel subsidies last year, while Saudi Arabia, Oman and Bahrain reduced support.

Reducing and scrapping subsidies, curbing spending and seeking non-oil revenue sources has become a priority for crude exporters from Saudi Arabia to Algeria that is grappling with low prices.

According to Bloomberg, Qatar is expected to post a budget deficit of 2.7 per cent of gross domestic product this year, after recording a surplus of 10.3 per cent in 2015, according to IMF estimates. It had an average budget surplus of 9.3 per cent of GDP between 2000 and 2012.

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