Muscat: Beginning next year, Oman will gradually cut fuel subsidies amid a slump in oil prices, Gulf News has learned.

The savings from the cuts will go directly towards the establishment of economic projects as well as efforts to curb fuel smuggling, according to media reports.

An official from the Ministry of Finance confirmed to Gulf News that subsidies would be cut, adding that the reduction will be gradual in order to ensure that the public will not suffer from the move.

He said a study by Oman’s Chamber of Commerce on the cuts showed that 68.7 per cent of those surveyed in various business and government sectors opposed the move, while 18 per cent supported it.

The study included transport services, construction, education and training sectors.

Subsidies on petroleum products, including petrol and diesel, are estimated to have cost Oman an estimated 900 million rials (Dh8.56 billion) in 2015, compared to 840 million rials in 2014.

Oman’s elected Shura Council was not notified of the move when it was in session, Ali Al Badi, the vice-president of the economic committee of the Shura Council, told Gulf News. The council is currently in recess in preparation for elections.

Al Badi added that most of the Shura members will support the government’s drive to cut the fuel subsidy with oil prices plummeting to around $45 per barrel.

Al Badi stressed the need to taking into consideration the social security of families who will get affected by the subsidy cut.

Darwish Al Beloushi, Minister responsible for Financial Affairs, recently stated that the Omani government is likely to start cutting fuel subsidies this year amid a slump in oil prices.

Al Beloushi believes that people will be more understanding as the natural resources are being overused. The move would come in light of low oil prices that are, according to Oman’s Minister of Oil and Gas Mohammad Al Ruhmi, costing Oman up to $55 million (Dh202 million) a day.

Al Beloushi said the current system of subsidies was ineffective as it did not focus on the poor.

Mohammad Al Araimi, an economic expert, told Gulf News that the subsidy cut will revive development projects and aid the budget.

Oman has run a 1.8 billion riyal (Dh17.09 billion) budget deficit so far this year, according data provided by the Ministry of Finance. The approved deficit for 2015 budget stands at 2.5 billion riyals — an increase of 38.9 per cent compared to last year, according to the budget statement.

Al Araimi said the fuel subsidy also led to over consumption of fuel as well as increasing the number of vehicles on the roads.

The Ministry of Oil and Gas said last August that the daily production of crude oil and condensate oil last July exceeded one million barrels per day, the highest figure in the history of Oman’s oil production.

The total oil production last July stood at 1,001,081 barrels per day, a rise of 0.48 per cent, during which time the country exported more than 24 million barrels.

Oman and Bahrain are the most vulnerable Gulf countries due to a prolonged slump in the oil prices, according to Standard and Poor’s credit rating agency. The agency attributed this to the low fiscal reserves and lack of economic diversification.

Moreover, Oman’s sovereign wealth fund (SWF) has assets worth $13 billion, far smaller than other Gulf SWFs.