Saudi Arabia considering a drastic cut in fuel subsidies

Saudi Arabia considering a drastic cut in fuel subsidies
2 min read
28 October, 2015
The Saudi oil minister says Riyadh is considering cutting fuel subsidies in what could be a dramatic change in economic policy.
The Saudi oil minister hinted at rising local fuel prices [AFP]
On Tuesday, Saudi Oil Minister, Ali al-Naimi said that his country is considering raising energy prices in the domestic market, stressing that the Kingdom of Saudi Arabia may cut its current generous support system, which has been blamed for wasting energy and increasing fuel consumption.

During a conference on the mining sector, Naimi was asked if local energy prices were expected to rise in the near future.

"Your question is, is it under consideration? The answer is yes," he replied.

Ali al-Naimi gave no further details of possible changes.

Saudi officials have previously hinted at such reforms, however Naimi's comments were the first public confirmation of potential changes from a senior official.

Local prices of gasoline and fuel is heavily subsidized by the Saudi government, and consequently have some of the cheapest prices in the world.

If followed through, the cut in subsidies would lead to a steep increase in fuel prices and would constitute one of the most drastic economic reforms in Saudi Arabia for many years.

The move would not be without controversy due to the large amount of low-income Saudis who rely on low-cost fuel.

Ridyadh has faced increased pressure to decrease subsidies this year, as the largest oil exporter in the world has suffered from lower crude oil prices, leading to a budget deficit that is expected to reach more than $100 billion this year.

The cut in energy subsidies may save billions of dollars a year, however analysts expect any change to be gradual, and note that it would require governmental approval at the highest level.