Oman fuel prices should be linked to global prices, say experts
July 22, 2015 | 9:21 PM
by Saleh Al Shaibany

MUSCAT: Experts urged Oman to stop regulating fuel prices and switched to global prices and updated them monthly to boost its national economy income.

The move, experts say, would not only increase revenues of the government but would pave the way for cleaner environment and make the private sector much more competitive.

“Government subsidies in petrol prices do not make sense anymore when the fiscal budget is becoming tighter. Fuel prices in our petrol stations must not be regulated but based on international prices and updated monthly. This way, the government can diversify its funds to the development of much needed infrastructure instead of making petrol cheaper in the country,” Ahmed Al Habsi, economic analyst at Capital Investment Company, told Times of Oman.

Oman is among the cheapest country in the world to buy petrol but the government is heavily subsiding it by as much as 50 percent. Petrol prices in the Sultanate have been unchanged for more than a decade. Other experts say removing petrol sale regulations would increase prices but it would lead to the diversifications of the country’s resources.

“People will pay more for each liter of petrol they buy people also know that the government cannot anymore afford to make it affordable to drivers. The common sense is that if you can afford a car than you can afford petrol. Hiking petrol prices would encourage the investments of transportation systems and diversify the economy to open up employment,” Said Al Shihri, an independent economist, said.

Oman’s budget deficit has been increasing steadily in the last five years. It is has forecast a OMR2.5 billion deficit this year and it is likely to widen by the end of 2015 as oil prices are persistently on the lower side. Financial analysts said Oman would save significantly if petrol subsidies are dropped to trim future deficits.

“I would put the savings of up to OMR1.2 billion a year if the government drop petrol subsidies. If you look at the broader picture, fuel subsidies would help the government manage power plants cheaper as well by passing the costs to consumers,” explained financial analyst Fareed Al Ojaili.

Local environmentalists also welcomed the idea of the government stopping subsidizing petrol prices saying that carbon emission in the country has been a concern for many years.

“The number of cars bought by individuals is increasing by ten percent every year and that is our major concern. Increasing fuel prices would stop families buying more than one car per household and that will certainly reduce carbon emission. It will also encourage people to start using carpools to go to work and make the environment cleaner,” Jason Hallmark, a local environmentalist told Times of Oman.

He added that cutting down the number of cars on the roads would also mean government savings on maintenance and the constructions of new roads.

Reporter can be reached at [email protected]

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