Dubai: UAE businesses are waiting to see how fuel prices will change before deciding how they will react to the change in fuel prices.
The government announced on Wednesday that it would cease subsidizing fuel on Aug. 1. Petrol is expected to increase while diesel will likely decrease.
Changes in fuel prices will not be announced until July 28, and will be implemented on August 1.
“Manufacturing companies and whoever needs fuel will suffer the costs and pass it on to people” said Simon Arnsten, IT and Marketing General Manager at Global Relocations. “If petrol prices goes up, our operating costs will increase and ultimately we will bring it to the customers. It is the consumers who will be affected at the end.”
Global Relocations is a moving company based in Dubai. Arnsten says rising rents are the main reason people move. “Your rent is the taxes you pay in the UAE and if fuel prices increase and the salaries don’t go up, people might leave,” Arnsten added.
If the fuel prices increase, some businesses will have face higher costs more than others. “It all depends on how much the fuel prices will increase and based on their decision. If the increase in the price is double then of course it will hurt me and then hurt other people,” said Mir Mohsen, an accountant manager at a local bank that manages the account of an online retail store that delivers their products using shipping companies.
It is unclear how much fuel will increase, but experts yesterday said the impact on consumers would be initially be “limited”.
The UAE, home to about 6 per cent of the world’s oil reserves, has the third highest fuel subsidy in the region after Saudi Arabia and Egypt. The subsidy has allowed companies to maintain low prices for customers as the government carries the remaining costs.
Another area likely to be affected is the UAE’s tourism industry, which is highly competitive. It is likely to be affected due to its dependency on transportation.
“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,” said Bilal Amgad, Director at Dubai Desert Safari.
Abdul Gabar, Managing Partner of Elite Limousine, said the transportation business will have to increase prices to make up any losses the business will face. “If I am making Dh15,000 per month and spending 15 per cent of this revenue on fuel, with an increase in fuel prices, there won’t be enough profits, so if they did that it, we will increase the prices,” he added.
Some firms, however, have said they would not be affected regardless.
A spokesperson for supermarket chain Spinneys said the food industry will not be signficiantly affected by the removal of the subsidy.
“Local distribution cost is a small component to the overall cost structure of food chain in the UAE, where by nature, most of the food consumption is imported. Local logistics generally costs around 3 per cent 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,” said Spinneys spokesperson.
The writer is a trainee at Gulf News.
