The UAE’s decision on Wednesday to deregulate fuel prices in the county is as necessary as it is smart.
Subsidies are a gift from the government. UAE drivers have enjoyed unusually low petrol prices for decades because of the UAE’s cheap-energy policy, that has led many countries to economic success.
As much as some people here still complain about fuel prices, especially compared to some of its neighbours, we cannot escape the fact that prices here are incredibly low by international standards.
Sure, you can point to Saudi Arabia and Kuwait, which have lower prices, but those are countries struggling to deal with their subsidies-heavy federal budget.
Subsidies are not good for an economy. Not only do they weigh heavily on budgets, they also raise questions about a country’s financial stability.
In a free market, especially one that is doing well, why should a government pay people to drive to work? It suggests a fundamental problem in that country’s economy.
The UAE does not have a problematic economy. It has seen consistent growth over its 43 years, including the successful development of aviation, tourism and IT industries. It is no longer solely an oil economy and if the UAE citizens and residents can afford the cars they are driving, then they can surely afford to pay for the petrol that powers them.
Maybe this will even lead to fewer cars on the road, which will be good for both traffic and the environment.
This action is also well-timed. Since the rise of US shale oil last year, global oil prices have nearly halved. Had the UAE removed subsidies when oil was at $115 (Dh423) a barrel, as it was last year, the impact could have been significant, but with oil at $56 and petrol prices dropping globally, there is little reason to complain. Afterall, it is not too much to ask that we actually pay for what we use, especially when it is cheap. It is time fuel subsidies came to an end.