Industry Trend Analysis - Subsidy Cuts Shape Long-Term Consumption Dynamics - MAR 2018

BMI View: Fuel subsidy cuts have contributed to the changing fuel consumption dynamics in the GCC, and continued subsidy reform packages will be necessary to promote more rational consumption of fuels. Softer domestic demand will support fuels exports, though this will be led by refinery expansions and greater natural gas use

As part of ambitious economic plans proposed largely due to pervasive fiscal pressures from low oil prices, a number of countries in the Middle East have reduced fuel subsidies which have been in place for several years. Recent attempts to liberalise the fuel pricing regime have targeted mainly the consumer market, leaving diesel prices - a more industry-centric fuel - largely untouched.

The ability of GCC governments to implement effective reforms while muting the impact of inflationary pressures will be key to the success of the proposed reforms. While some members have taken major steps towards introducing a more market-oriented fuel pricing, others have failed to make sufficient progress in pushing forward a public debate over a more rational energy consumption.

Subsidy Cuts Shape Long-Term Consumption Trend
Saudi Gasoline Consumption (000b/d) vs Gasoline Prices (USD/litre)
f = BMI forecast. Sources: JODI, BMI

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