Painful as it may be for the wallet of the consumer, the decision to hike the price of petrol is good for the economy and the environment.
The UAE's oil companies will raise petrol prices by Dh0.20 a litre, effective Thursday, as part of the gradual liberalisation of the market in the country.
Petrol in the UAE is effectively highly subsidised, reducing the price for consumers but inflicting real and opportunity costs on the companies and the government. While the UAE has oil resources, refining it into petrol carries a significant cost.
The price of petrol in the UAE will have to increase further before the companies' real costs are covered and they are able to make a sustainable profit.
However, once the price is market related, the companies will have to increase and decrease it in line with the fluctuating international cost of oil.
In any event, fossil fuels are a major source of pollution but cheap petrol has encouraged people to use their cars without proper consideration for the cost and the environment.
An increase in the price of petrol will encourage people to think twice before driving and to begin to make more use of public transport, to the benefit of the environment in which we all live.
