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9 August 2015,

Cheap oil is costing West Asia

Amit Bhandari, Energy and Environment Fellow, Gateway House, wrote an article 'Cheap oil is costing West Asia'. The article was republished in Eurasia Review

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The big news from the oil world in the past fortnight was the ‘deregulation’ of gasoline/petrol and diesel prices in the United Arab Emirates (UAE), resulting in an increase by 24% in the price of petrol to $0.58 per litre, still very low by global standards. This hike comes at a time when global petroleum prices have fallen and reveals the extent to which fuel in the UAE was being subsidized and the pain from low oil price has now forced the UAE government to cut down on subsidies.

Meanwhile, fuel at $0.31 a litre is cheaper in neighboring Oman, giving rise to a new business – the smuggling of petrol. News reports indicate that fuel stations at the UAE-Oman border are doing brisk business, and new stations have sprouted in recent weeks – a concern for Omani authorities. The smuggling is hurting Oman, which has a current fiscal deficit of 14.8% of GDP. Petrol prices of other Gulf Cooperation Council(GCC) members Saudi Arabia, Kuwait, Bahrain and Qatar are even cheaper, ranging from $0.16 to 0.28 per litre.

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