UAE residents enjoy some of the cheapest fuel prices in the world. Average fuel price in the UAE stands at about AED 1.7 per litre, whereas the global average is more than double of that, at AED 4 per litre. There’s only a handful of other countries like Nigeria, Qatar and Saudi Arabia which have petrol prices lower than the UAE’s.

This has come to be due to a hugely subsidized supply of fuel within the UAE. But that’s about to change. As per a recent announcement made by the UAE Ministry of Energy, fuel prices will be deregulated starting from August 1.

By how much are fuel prices expected to rise?

According to Matar Al Nyadi, Chairman of the recently formed Gasoline & Diesel Prices Committee, petrol prices are expected to rise slightly with the deregulation, while diesel prices are expected to drop in line with falling diesel prices globally, over the last one year.

There’s no official word out yet, as to how much the increase will actually be. Going forward, fuel prices will be updated and announced on the 28th of every month in line with international prices.

[Related: Buying a car in the UAE? Where to start]

How will fuel price-hike in the UAE affect you?

Since diesel cars are not popular in the UAE, almost all privately owned vehicles run on petrol. Therefore, majority car owners will witness higher fuel expenditure following the deregulation.

According to the Ministry of Energy, petrol costs between 3-4% of the average income of UAE residents. Therefore the monthly fuel expenditure of individuals is not likely to get affected much, after the fuel price-hike.

Changes you can expect to see in the future:

The UAE fuel-price hike follows in the steps of many other countries’ fuel-price deregulation in recent years like India, Mexico and Indonesia. It is expected to make the UAE economy stronger and less dependent on subsidies.

And the impending price-hike is not all bad news for residents. It is likely to bring about the following changes in the future:
• Increasing popularity of more fuel-efficient cars. And, if your looking for ways to finance your next car, you can compare Car Loans in the UAE to find the best options.
• Greater use of public transportation (Dubai metro, RTA buses and the tram) and lesser traffic on the roads.
• Emergence of alternative fuel vehicles – hybrid cars and electric cars.
• Lower CO2 emissions and a reduction in the UAE’s carbon footprint.

[Related: Fuel consumption: How does your car stack up?]