A decade of change
Countries that rely heavily on oil resources to drive prosperity have long understood the challenge of government funding amid volatile global commodity prices. The last decade saw the highest price in history for crude oil per barrel followed by a persistent price slump that has eaten away at expected government revenue. While Saudi Arabia has exercised some control over the oil market through OPEC’s production restrictions, recent measures to bolster the economy and fund the state have aimed at domestic consumption. Motorists are already seeing changes. In January, prices at the pump went from .75 to 1.37 SAR and .90 to 2.04 SAR per liter for octane 91 and octane 95. However, even with increases of over 82% and 126% for those fuel grades, prices are still only equivalent to 1.38 and 2.06 USD per gallon, well below the international average.
Sin taxes, VAT, and gas price increases
This change follows the 2017 introduction of sin taxes and was implemented alongside the new 5% VAT, which applies to most goods and services in the kingdom. On-site surveys in Saudi Arabia and the UAE this quarter showed higher than average inflation, driven especially by increases in the transportation and tobacco categories in the past six months to a year. The UAE also introduced gas price increases, as well as a 5% VAT, at the start of this year, demonstrating a concerted effort by countries in the region to diversify their funding sources and bring their gas prices more in line with their real market value.
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Want to learn more? The above excerpt is taken from Data Points, AIRINC's quarterly newsletter. Data Points brings you the latest updates from our Housing, Goods & Services, and Tax departments based on our expert international surveys, which are conducted by our global data collection team on-location.
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