The UAE government could save several billions of dollars a year on fuel subsidies, following the move to deregulate the prices of oil, according to a report.

Fuel subsidies are set to removed starting on August 1 and the prices of oil will be based on average global costs, said the Gulf News report.

The decision has been aimed at reducing fuel consumption and supporting the national economy, it said.

The price of petrol in the UAE, where residents have higher incomes than in many other markets, is one of the lowest globally, but it is the highest in the Gulf Cooperation Council (GCC) region, said the report.

The reason it is cheaper than in most corners of the globe is that petrol is being subsidised by the government.

The government spends nearly $30 billion a year to absorb the cost of petrol, and the same amount will be saved - and consequently spent on economic diversification activities - if the financial aid is lifted, it said.

More government savings could result in a lot of benefits, including more employment opportunities for UAE residents, Mandagolathur Raghu, head of research at Kuwait Financial Centre (Markaz), was quoted as saying.