BUSINESS

Saudi households among the lowest in transport expenses

July 12, 2017

JEDDAH — Saudi households are among the lowest in the monthly transportation expenses, and will continue to allocate one of the lowest shares of monthly income to transportation in comparison to other GCC countries after the prices deregulation, according to a recent study by King Abdullah Petroleum Studies and Research Center (KAPSARC).

"The impact of domestic fuel price reforms on the use of public transportation in Saudi Arabia" shows that fuel deregulation can increase the average annual revenues in the Kingdom by about $ 8.2 billion from domestic sales and exports in the varying crude price scenario and $ 5 billion in the fixed $60/bbl scenario.

A study authored by KAPSARC’s visiting researcher Ibrahim Algunaibet pointed that deregulating fuel prices would encourage consumers to travel by more efficient public transport modes. This would contribute to increase their income and help them adapt to the deregulated prices besides positive outcomes in reducing CO2 emissions by between 4 million to 26 million metric tons (mt) per year.

The paper explained that the current low crude prices offer policymakers in Saudi Arabia the opportunity to deregulate transport fuel prices without significantly increasing them, where the gap between the administered and market prices was around 346 percent, while this difference is a mere 15 percent now due to the current low international prices

The paper aims to understand more about the demand of end-use energy and help the refining sector in the Kingdom to develop plans to prepare for future changes in demand as a result of the new means of transportation. KAPSARC has developed model to understand the dynamics of the country's energy system. The model was used to study the effects of various pricing policies of Industrial fuel and residential efficiency on the energy economy. — SG


July 12, 2017
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