Saudi Arabia is looking at raising domestic energy prices, Oil Minister Ali al-Naimi said on Tuesday, according to Reuters.
The move implies that the Kingdom could cut a lavish system of subsidies blamed for waste and surging fuel consumption.
Asked on the sidelines of a mining conference whether he expected domestic energy prices to increase in the near term, Naimi told reporters: “What you are asking is: Is it under study, and the answer is yes.”
Reuters also quoted a ‘Gulf industry source’ as saying that Saudi officials have approached the UAE government, which removed fuel subsidies in August, asking for advice on how to conduct such a reform.
“I hear it from the highest level, they will do it soon and I think they will have to do it before the budget announcement,” the chief executive officer of a major Saudi company told Reuters, speaking of gasoline price rises.
Naimi gave no details of the possible changes. In the past, officials have spoken privately of the reforms, but Naimi’s remarks were the first public confirmation by a senior minister that the subsidy was ‘under study’.
Domestic prices of gasoline, other fuels and the gas feedstock used by Saudi petrochemical producers are heavily subsidised by the government and among the lowest in the world; gasoline costs about 15 cents a litre.
Pressure to consider such measures as removing fuel subsidy has increased this year, as crude oil prices as low as $44 a barrel have slashed the revenues of the world’s top crude-exporting country.
It is estimated that the Kingdom is saddled it with a state budget deficit of well over $100bn this year.
The state budget for next year, which may include other steps to reduce the budget gap such as major cuts in spending on infrastructure projects, is expected to be released by late December.
