Saudi Arabia May Raise Gasoline Prices by 80%

Saudi Arabia is considering a plan to phase out subsidies for gasoline and jet fuel in November at the latest, as the world’s biggest oil exporter pushes a program to curtail spending after a global slump in prices.

The government would boost gasoline to parity with varying international prices under the plan, according to a person with knowledge of the matter. At current levels, this could result in a hike of about 80% for octane-91 grade gasoline to about 0.36 cents, the person said on condition of anonymity, Bloomberg reported.

The government plans to delay increases in other energy prices until early 2018, the person said.

Authorities are expected to make a final decision on the plan in September or October, the person said. The Saudi finance, economy and energy ministries did not immediately respond to requests for comment.

Energy-subsidy reform is a key part of Saudi Arabia’s plan to overhaul the economy, along with the sale of stakes in state-owned entities, including the world’s biggest crude exporter known as Saudi Aramco.

The kingdom raised fuel prices in December 2015 and announced plans for further increases. Authorities have also announced plans for a cash transfer program that would start before further subsidy cuts to help Saudis cope with the impact, as the economy struggles with the worst slowdown since the global financial crisis.

“It is important for the Saudi government to cut subsidies in order to ease pressures on budget deficit,” Tariq Qaqish, managing director of the asset management division at Mena Corp. Financial Services LLC in Dubai, said by email.

“Not only the transportation and logistics sectors will be affected significantly, any company that is involved in production and needs to transfer their end products to consumers will be affected.”