Lower Oil Prices: What Happens In The UAE?

07 Apr, 2015 - UAE Life & Economy


In the UK when the oil price drops we get excited at the prospect of cheaper petrol prices. But what happens to a country like the UAE, one seemingly at the other end of the spectrum?

The first thing you should know is that in the UAE the price of petrol is subsidised. To fill a two litre car you will need about twenty pounds. The UAE actually charges the most for petrol in the GCC: in Bahrain you can fill a car for a fiver! This is not to say that petrol itself is managed any differently. The UAE pumps the raw materials but still pays the same as everyone else for the refined product. It just chooses to subsidise the price.

But, the oil price relates to more than just petrol prices in the UAE, it is the lifeblood of the economy and has been for many years. However, when the price drops the economy does not collapse (despite what doomsayers may write in the UK press).

As with similar countries, the UAE secures long term deals around the world to supply oil and gas meaning that the UAE has large cash reserves. That cash trickles down into the economy so the country can grow and continue to develop, not least in non-oil areas of the economy where there is a need to promote growth and economic diversity.

In the UAE, when the oil price drops government departments may cut budgets but in general life goes on as normal and, if anything, is why the UAE has worked so hard to diversify its economy away from energy market dependence.

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