UAE supermarkets: Little impact from fuel price deregulation

In the UAE little of the produce sold in supermarkets is made, grown or raised in the country, so it is unlikely that the weekly household shopping bill will change much (File Photo: AP)

When motorists in the United Arab Emirates (UAE) go to the fuel pumps Saturday morning, many are unlikely to even notice the price increase.

For many, the deregulation of prices at the fuel pump has caused concern – the increase for Special 95 will be in excess of 20 percent per liter.

However, ask most drivers in the country exactly how much it costs to fill their vehicle’s tank, and they probably will not know.
From Saturday, the price of a liter of Special 95 will go up more than 23 percent from 1.72 AED ($0.58) to 2.14 AED ($0.72).

Super 98 will cost 2.25 AED ($0.61), and E Plus 2.07 AED ($0.56). Diesel will drop 29 percent from 2.90 AED ($0.79) to 2.05 AED ($0.56).

The prices will be reviewed each month. Watching closely will be businesses reliant on the roads to transport their goods and deliver their services.

The deregulation was announced last Wednesday by the Ministry of Energy, which said the aim was to support the economy, lower fuel consumption, protect the environment and conserve national resources.

Energy Minister Suhail al-Mazrouei recently told UAE newspaper The National that fuel prices would remain relatively low.
He said he did not believe motorists would give up their cars any time soon, except for those on low wages.

He told the newspaper: “We were transparent with the consumers and we will continue to be transparent with them. Our prices will be lower than any liberated market because there’s no tax and we reduced the profitability of the companies downwards.”

He added that prices would reflect the market, so if prices dropped, the cost at the pumps would drop too.

Taxis

The most obvious service to watch is probably taxis, but a Dubai Roads and Transport Authority (RTA) spokeswoman told Al Arabiya News that an announcement had not yet been made regarding whether fares would change.

Fares in the emirate were increased in Nov. 2014, with the flag-fall rate rising to 5 AED ($1.36) from 3 AED ($0.82).

Pre-booked fares rose from 6 AED ($1.63) to 8 AED ($2.18) during off-peak times, and from 10 AED ($2.72) to 12 AED ($3.27) during peak hours.

One Dubai taxi driver told Al Arabiya News that the RTA “haven’t told us anything yet, but I suspect the fares will go up again.”

Comparative prices

Despite the initial rise in the UAE, the overall cost remains relatively low compared with other countries around the world, especially in Europe.

The world's most expensive fuel is in Norway, where motorists pay $1.93 per liter, while in The Netherlands it costs $1.87. In Italy, a liter will set you back $1.86, and in the UK $1.81.

Lebanon is the most expensive Arab nation to drive in, with a liter of unleaded fuel costing $1.74, making it the seventh most expensive in the world. At the other end of the scale, Saudi Arabia charges just $0.12.

The UAE boasts approximately 6 percent of the world’s oil reserves, and until now had the region’s third-highest fuel subsidy after Saudi Arabia and Egypt. The subsidy has enabled many businesses to provide relatively low-cost services.

Monitoring prices

In the UAE, where  fuel is still relatively cheap compared with other parts of the world, businesspeople say they will monitor the cost, and where necessary the increased costs will be reflected in the price of their goods and services.

British expat Lisa Jackson, regional manager at the storage and removals company The Box ME, said she would watch price changes.

She told Al Arabiya News: “Obviously if we incur extra costs through the fuel price increases, we’ll have to reflect this in the price to the customers. Of course I’m concerned, although compared to the price of fuel in the UK this isn’t that expensive.”

Jackson said members of the removals business were closely monitoring the cost of fuel in the UAE. She said the real concern was in the long-term prices.

Tourism

The UAE has a highly competitive tourism industry. Among the most popular attractions are the numerous desert safaris that use convoys of SUVs to drive over the dunes.

But despite the overheads, Bilal Amgad, director at Dubai Desert Safari, told UAE daily Gulf News that he did not expect to introduce any major changes.

He said: “We will still run on our prices unless there is a major change. The tourism industry has a competitive margin, and many run on low profits, if the prices increase, we will all have to raise it altogether so it is not going to necessarily affect one business but the industry as a whole.”

Supermarkets

Changes in fuel prices in Europe regularly impact households, with road miles proving to be the heaviest burden on the budget as farmers, hauliers and supermarkets all have to transport their produce long distances.

However, in the UAE little of the produce sold in supermarkets is made, grown or raised in the country, so it is unlikely that the weekly household shopping bill will change much.

In a statement issued to Al Arabiya News, a spokesman for Fine Fare Food Markets - the company that manages the Spinneys and Waitrose supermarkets in the country - said fuel prices were of little concern.

“Local distribution cost is a minor component to the overall cost structure of the food chain in the UAE, where by nature most of the food consumption is imported,” he said.

“Logistics generally costs around 3 percent for a retail business, and the fuel component is much smaller. Removing fuel subsidies should not have significant impact on food prices in the UAE.”
 

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Last Update: 13:32 KSA 16:32 - GMT 13:32
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