Wednesday, August 05, 2015
10
A snap from my vacation... Niagara Falls

Well that was a fantastic July for me. Lots of time spent with the family and friends, and even snuck in a side trip to Cuba with just my wife as well - a real treat considering we have 2 kids under 3! We even saw a few friends who have lived in Muscat (or still do) whilst back too - which was fun!

Now it's back to the daily grind that is working life here in Muscat. And still, 9 Omani summers in, it's really hot isn't it?! Or is it just me coming back from not-so-hot climes? At least the schools haven't started up again yet (and the traffic that goes with it).

It seems that a few things have happened since I've been away, but I think most importantly the news that the UAE has lifted it's subsidies on fuel is probably the biggest thing I've noticed that might affect us here in Oman. The price for Super fuel in the UAE is now about 235bz a liter versus 120bz a liter here (ok or 121bz in outlying areas). So basically it's double (bearing in mind that the oil price is really low right now). The UAE had been pushing it's prices up bit by bit over the years and so the actual increase on August 1st was about 24% - and that's only for August... the price will change every month!

If Oman were to do the same as the UAE and link fuel pricing to world markets, we'd see the price at the pump basically double (whereas diesel will probably increase only a little bit) based on current market prices. Which would probably lead to a lot of people being very upset. I suspect that if there was to be a review of fuel pricing and its subsidies then perhaps it'd be a gradual adjustment of the subsidy.

I guess we'll probably see the same on our power and water bills too, as subsidies there will be reviewed as well. From a purely economic standpoint, it makes sense to revise the subsidies on fuel, but of course there are other issues to consider. Back in January when Oman's 2015 budget was posted, it was based on RO 1.8 billion in subsidies for fuel & gas (which is used for power and water) and Oman went into 2015 with it's budget knowing they were going to have a RO 2.5 billion shortfall in funding. Here we are in August and the latest projections are showing a RO 3.5 billion shortfall for 2015... I'd say a review of subsidies is guaranteed, I'm more interested in what Oman's going to do with it's other expenditures. I think 2016 is going to be a tough year, both financially and politically!

So, do you think there will be a change to fuel subsidies here in Oman, and if you do, when?!

le fin.

10 comments:

Anonymous said...

double nothing is.. nothing. still don't care.

Anonymous said...

I agree. why is the author obsessed with fuel prices?

I'm guessing the author gets paid around 2000RO a month. Probably runs 2 cars.. maybe spend max 15RO a month on Fuel (for driving around town) So if they double its 30RO.. from a 2k salary. He probably spends more on a single lunch (or a weeks beer).

We live on one of the worlds cheapest countries to buy fuel (the 9th lowest worldwide). If they made it 10x more expensive.. it would still just be the same as in the UK.

Maybe move to Venezuela?

This is what I said...

Maybe the author isn't sitting in an ivory tower and actually understands the long-term implications of a doubling of fuel and utilities rate.
Think of the people on 300 Rials a month that also have to spend 15 Rials a month in fuel because they have to travel further between an affordable school and an affordable home. Their expenditure has gone from 5% to 10% of their income.
What about the transport cost of goods that will be transferred to the end-buyer?

If you can read about the price of fuel going up 100% and still consider it nothing then I would say that you are one of these bloated egos that we would all rather foxtrot-oscared out of Oman.

Anonymous said...

It's is likely that prices will double - or maybe more - it is also likely that locals will get an allowance within their pay to offset these increases. Others will be expected to pay the unsubsidised costs.

Jdw said...

They should cut all subsidies on fuel, the Omani people would be far better of if the money would be used in education or healthcare instead of just burning it.

Anonymous said...

Perhaps $1/2 Billion shouldn't have been spent on the replacement 'Fulk al Salamah' for Royal Yachts, which is being built in Italy.

http://www.ship2shore.it/it/shipping/partita-per-genova-l-ultima-newbuilding-di-tmariotti_55813.htm
http://www.charterworld.com/news/video-150m-motor-yacht-completed-mariotti

I would be surprised if their aren't some surprised and upset citizens if they see cut backs for the sake of this...

Anonymous said...

"This is what I."
I get paid half in the UK.. but petrol is 10x more. People still drive there.. they just are more economical about it.

The average wage in the uk is 24k. (2k a month) after tax 1300. It easy to spend 60 a week on fuel commuting, which is more than 15% of monthly wage

Its all perspective.

PLUS.. If the price goes up I might decide to buy an economical car next time, or car pool.. or maybe people might start to use buses (baisa buses until a proper service starts).

Imagine the progress.

But yeah.. i drive a 5.0 4WD right now.. like everyone else.
Petrol is cheaper than water here.

Anonymous said...

As the article touches on the most serious impact of a fuel price hike is the cost to industry.

Most manufacturing SME's run on tight margins which have been squeezed further by the recent twin blows of the rising minimum wage and of course, Omanisation. Adding to this pressure with rising fuel and power costs will sadly push some of these businesses under at a time when the economy needs the industrial sector to perform more strongly... But with hydrocarbon revenues through the floor the subsidies must go to prevent a large structural deficit from developing.

So for these businesses to survive they must improve productivity, which brings us back to Omanisation - and some politically uncomfortable truths. Paying people to sit at home or do less than half a job in order to meet quotas isn't sustainable. In certain quarters (but by no means all) a crippling sense of entitlement exists. Overcoming this social attitude is the key to Oman's future and I wish them all the luck with it.

Anonymous said...


The demographic profile of Oman is different from UAE. Subsidy is a tool, where the govt reduces the burden of common man. considering that most of them uses private transport, any drastic increase will burden the common man.

this is my suggestion. now the subsidy is being used by everybody including rich. so to ensure that subsidy reaches the needy, govt can impose a surcharge on fuel based on engine CC. this can be collected at the time of mulkiya renewal. All vehicles upto 2000 CC engines can be exempt...above that based on average fuel consumption surcharge can be levied. for ex for 4000 CC vehicle, average kms running can be taken at 20,000 per year. so for that assuming 5 kms per litre, 4000 litres would be consumed. so if 75 baizas is the subsidy, surcharge can be levied at OMR 300 per year.

an allowance can be given for old vehicles..

similiarly for electricity / water, the higher the consumption, the higher the tariff.

Anonymous said...

tbh, the low price of petrol always used to annoy me. I couldn't help thinking Oman was wasting one of its natural resources - in the not too distant future they might have to import petrol.... the polar bears might also appreciate a higher petrol price...

A more realistic petrol price might also mean you can drive along al-shati street on Friday and Saturday night. How I miss spending an hour to travel a mile on public holidays ;)

Regards

ex Qurum resident

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