The UAE has decided to deregulate fuel prices effective from August 1 and the country will adopt a new pricing policy linked to global prices.

The decision, related to gasoline and diesel, is aimed at supporting the national economy, lowering fuel consumption, protecting the environment and preserving national resources, a Wam report quoting the Ministry of Energy said.

Suhail Al Mazroui, Minister of Energy, said that in accordance with the new pricing policy that has been ratified by the UAE Cabinet, a fuel price committee has been set up to review fuel prices against average international levels prior to their implementation in the UAE every month.

Chaired by the Undersecretary of the Ministry of the Energy, the committee includes as members the Undersecretary of the Ministry of Finance, CEO of Adnoc Distribution, and CEO of Emirates National Oil Company (Enoc).

The minister said: "Considering the international prices of oil and petroleum derivatives, we expect diesel prices to go down. This will stimulate the economy as lower diesel price would mean lower operating costs for a wide number of vital sectors like industry, shipping and cargo among many others."

Matar Al-Nyadi, undersecretary of the ministry and chairman of the new committee, said there could be a slight increase in gasoline prices "because they were below the global prices."

He added: "Gasoline is used in the UAE for personal transport and as there are high salaries in the country already, we are not expecting the slight rise to have a big impact on people's income."

Al Mazroui added that the cost of gasoline represents 3 per cent to 4 per cent of an average income in the UAE, which is a reasonable percentage compared to international costs. Consequently, deregulating prices would not have a notable impact on individuals’ cost of living.

Al Mazroui said: "The decision to deregulate fuel prices has been taken based on in-depth studies that fully demonstrate its long-term economic, social and environmental impact. The resolution is in line with the strategic vision of the UAE government in diversifying sources of income, strengthening the economy and increasing its competitiveness in addition to building a strong economy that is not dependent on government subsidies. This step will put the UAE on par with countries that follow sound economic methodologies. It is also anticipated to improve the UAE’s competitiveness while positioning the nation on international indices."

Speaking on the environmental benefits of the decision, Al Mazroui said that deregulating fuel prices would help decrease fuel consumption and preserve natural resources for future generations. It will also encourage individuals to adopt fuel-efficient vehicles, including the use of electric and hybrid cars.