Saudi raises petrol prices by 50%, Bahrain follows suit
The Saudi council of ministers headed by King Salman decided to raise the price of higher-grade unleaded petrol to 0.90 riyals ($0.24) per litre from 0.60 riyals, a hike of 50%, and for lower-grade petrol to 0.75 riyals ($0.20) from 0.45 riyals per litre, a 67% rise.business Updated: Dec 29, 2015 09:04 IST
Saudi Arabia raised the petrol prices for some products by more than 50% from Tuesday as it cut a range of subsidies after posting a record budget deficit.
While other Gulf countries are considering the move, Bahrain followed the suit immediately and cut down the subsidies for diesel and kerosene from next month.
Prices will also increase for electricity, water, diesel and kerosene under the cuts decided by the council of ministers headed by King Salman, the official SPA news agency reported on Monday.
The council decided to raise the price of higher-grade unleaded petrol to 0.90 riyals ($0.24) per litre from 0.60 riyals, a hike of 50%, and for lower-grade petrol to 0.75 riyals ($0.20) from 0.45 riyals per litre, a 67% rise.
Petrol prices in the kingdom have been the cheapest in the Gulf and some of the lowest in the world.
National oil conglomerate Aramco said on Twitter it was immediately closing petrol stations until midnight on Monday, when it will resume sales at new prices. The cabinet said the increase was in line with international energy prices.
Prices will also rise for other fuels including natural gas, diesel and kerosene and for heavily subsidised electricity and water, but details were not immediately available.
Saudi Arabia is following in the footsteps of the neighbouring United Arab Emirates, which became the first Gulf state to liberalise fuel prices earlier this year.
Kuwait lifted subsidies on diesel and kerosene at the start of 2015 and plans other cuts early next year, especially on electricity and petrol.
Other Gulf states like Bahrain followed the suit similar measures and announced plans to cut government subsidies for diesel and kerosene from next month.
BNA news agency cited energy minister Abdulhussein Merza as saying the changes would take effect from next month, adding however that subsidies would remain in place for bakeries and fishermen. The minister also said that the lifting of petrol subsidies was still under consideration.
The International Monetary Fund has estimated the direct cost of energy subsidies in the Gulf states at $60 billion. If indirect costs like environmental and road traffic expenses are counted, the expense rises to $175 billion.
The IMF has said that if Saudi Arabia raised its fuel prices to Gulf levels, it will save around $17 billion annually.