In the oil-rich United Arab Emirates just a few short years ago, petrol was more affordable than bottled water. On the eve of each month’s price increases, there are now lengthy lineups outside gas stations
Since Russia’s invasion of Ukraine, fuel prices in the main OPEC producer, which are set in line with global oil price benchmarks, have increased by almost 70%, exacerbating contrasts with nearby petroleum states that massively subsidize gasoline.
The disparity has led to protests from Emiratis who enjoy generous cradle-to-grave assistance and spurred the government to increase social spending for those with lower incomes.
As oil prices fell, the UAE relaxed its gasoline subsidies in 2015, saving the government billions of dollars while putting the nation at the forefront of the region’s long-delayed economic reforms. Even now, as the world’s economies shift away from fossil fuels, Gulf Arab rulers enjoying a windfall from sky-high oil prices are aware that it won’t last forever.
According to Monica Malik, chief economist at Abu Dhabi Commercial Bank, “The UAE is truly distinguishing apart.” Its policy is strongly focused on reforms.
The unparalleled fuel price in the UAE, at over $1.23 per liter, or $4.66 per gallon after the price increase in July, is still less than the sobering records achieved in the United States and Britain as the conflict in Ukraine unleashes the largest commodity shock in decades. However, residents of the area have long seen affordable fuel as a basic human right. The price per gallon is almost four times lower in Kuwait’s rich welfare state.
Suhail al-Bastaki, an Emirati engineer, claimed that “everyone is moaning.” Simply said, it’s too pricey.
For the UAE and its hydrocarbon-dependent neighbors, the war is an unexpected boost to the national budget, in contrast to the rest of the world. Since the conflict, wealthy Russians have moved to glitzy Dubai, which boasts the most diverse economy in the area.
But the most recent price increase in the UAE has shown that the area is not immune to forces of the world market.
The UAE and Saudi Arabia allocated a combined $13 billion in social spending for low-income people last week as pressure rose. This choice was obviously unavailable to the region’s less developed economies, including Egypt and Lebanon, where the cost of bread is rising and hunger is spreading.
The cost of fuel price increases is highest for the legions of workers from Africa, the Middle East, and South Asia who drive the economy in the UAE, where foreigners outnumber locals by almost nine to one. Inflation has reduced laborers’ already modest wages, leading to an unusual springtime outbreak of unlawful strikes.
In recent years, the budgets of other Gulf Arab nations have also been balanced by reducing governmental subsidies. However, none have gone as far as the UAE, where fuel prices are nearly twice as high as the average for Gulf Arab nations due to consumer reaction concern.
According to analysts, one reason why the nation may get away with this is that the responsibility falls on its 9 million expat residents. While food prices have increased, Saudi Arabia’s inflation has been kept under control thanks to the government’s ban on fuel prices. The country has a population of 35 million, of which two-thirds are citizens.
Nasser Saidi, an economist in Dubai, claimed that “the local populace of the (UAE) is not substantially affected.” They perceive an increase in fuel prices, but they continue to enjoy protection under the social contract.
The minuscule Emirati population enjoys a rich welfare system that provides assistance with everything, including free education, health care, and housing, grants for marriage, scholarships to international universities, and well-paying government jobs.
As monarchs profited from the oil boom and gave some of the wealth to locals in exchange for political allegiance, that contract spread throughout the region.
Governments are aware of what to do in prosperous and unsatisfactory times: distribute the riches. Since sanctions on Russia sparked worries about shortages, the price of international benchmark Brent crude has increased by around 50% to above $100 per barrel.
The expenditures are an acknowledgment that the public is aware of the current high level of oil earnings, according to Karen Young, a senior scholar at the Middle East Institute in Washington. “This is a classic sharing mechanism.”
After the most recent increase in fuel prices in the UAE, complaints from Emiratis on social media and in public gathering places grew louder.
Hassan al-Amiri, an Emirati social media influencer, stated that “people were suffering.” “People assume Emiratis are outrageously wealthy, yet I don’t own an oil rig. Our requirements are growing.
According to Emirati political specialist Majed al-Raeesi, the complaints reached the president Sheikh Mohammed bin Zayed Al Nahyan’s monthly majlis, when any citizen may attend to voice concerns.
Sheikh Mohammed outlined plans last week to quadruple the government’s social assistance for Emirati families who fall under the $6,800 monthly income threshold. The $7.6 billion package, which also includes housing allowances and assistance for job searchers, will cover 85% of the most recent increases in fuel prices and 75% of the inflation in food prices.
The government portal crashed due to the volume of applications it received.
Al-Amiri said that “the leadership listened to the streets,” yet his comments drew criticism from several Emiratis online. People are cautious when criticizing the government in public for fear that it would be mistaken for dissent, which is forbidden.
King Salman of Saudi Arabia, the second-largest oil producer in the world, declared $5.33 billion in direct cash distributions to its residents “to safeguard recipients from the effects of global price spikes.”
However, those who require it most won’t receive the assistance. Low-paid migrant laborers in the area are becoming increasingly desperate due to the rising cost of living.
In Dubai, Uber drivers and others who use food delivery services who pay for their own fuel claim to be just breaking even. In May, delivery riders for two major companies went on strike in protest of their meager pay, defying the UAE’s ban on labor demonstrations.
In order to cover the additional gas taxes in Dubai, Uber announced it would increase some trip prices by up to 11%, but some drivers believe this is insufficient.
The promise of decent income lured Muhammed, a 38-year-old Uber driver from Nigeria, to Dubai 12 years ago. The money he had to send home to his wife and new daughter is now dwindling rapidly.
Out of concern for retaliation, he simply used his first name when he said, “I can’t stay here any longer.” “I have nothing and have worked in Dubai for 12 years.”