Kuwait became the last GCC country to hike subsidised petrol prices as part of a broader effort to control government costs and cope with lower oil revenues.
The cabinet late on Monday approved the higher prices that will take effect from September 1 this year, with the price hikes ranging from 41 per cent for low-octane petrol to 83 per cent for environmentally friendly “ultra” low-emission petrol.
“Kuwait is the last GCC state to embark on restructuring the fuel prices, however the new ones remain the lowest among the council countries, as well as globally,” official news agency Kuna reported.
The government approved a new price for octane-91 of 85 fils per litre, for ultra-premium of 165 fils per litre, and for octane-95 of 105 fils per litre, a hike of 61 per cent.
The government said it had set the prices after “examining global rates” and will have a commission review them every three months.
As with other GCC countries, it did not detail how it would calculate prices from September apart from saying they would “be in harmony with global rates”.
“It’s been a long time coming for Kuwait,” said Charles Swabey, an analyst at BMI Research in London.
Last year, the government increased diesel and kerosene prices and reduced subsidies on aviation fuel, saving an estimated 0.3 per cent of GDP annually, according to the IMF. It had petrol prices under review since the beginning of last year.
Kuwait and fellow oil-dependent GCC countries have introduced a range of fiscal measures that, as well as dismantling subsidies, have included new taxes and a broad range of efforts to shift their economies towards non-oil sectors, such as health care and defence manufacturing.
“Even if oil prices rise toward the end of this year and beyond, we don’t see [Kuwait or other GCC governments] rolling back the subsidies. These are part of long-term structural efforts,” Mr Swabey said.
One worry is that rising fuel prices in the GCC could stymie growth in demand for fuels in the region, which has been among the strongest in the world. That was especially so after Oman suffered a sharp drop in demand in the first few months of the year following its fuel price hikes.
But Mr Swabey said that while “there might be a slight lull in demand initially as consumers adjust spending patterns to higher prices, the long-term outlook remains strong. The combination of robust economic growth and rapidly increasing vehicle numbers will support our view that the GCC remains a strong fundamental growth market for refined fuels.”