Saudi sets upper limit for gasoline prices as oil prices climb

Saudi Arabia’s government set an upper limit for domestic gasoline prices and said the state would bear any extra costs, softening an energy subsidy cut programme.

The ceiling for local gasoline prices will be set at June’s levels, or SAR2.18 per litre of 91 octane, as of Saturday, according to a statement carried by the official Saudi Press Agency. The decision was made to “decrease the burden of living costs on citizens and residents” and “support local economic activity,” a state committee for amending energy prices said in the statement.

The change will blunt the impact of subsidy reforms introduced by Crown Prince Mohammed bin Salman and is a nod to complaints from Saudis about the rising cost of living under his economic diversification programme. Inflation in the world’s largest oil exporter stood at 5.7 per cent in May — the latest figure available — driven by higher food and vehicle prices as well as a move to triple the value-added tax last year.

Rising gasoline and electricity prices have drawn particular ire since 2015, when the subsidy reform was introduced to promote more efficient consumption and help plug a budget deficit brought on by plunging oil prices.

Last week, crude prices jumped briefly to the highest in more than six years in New York after discord at the OPEC+ stopped a supply increase. Crude’s surge, combined with a rally in other commodities, has central banks fretting about inflation again.

Saudi Arabia’s local cost of gasoline will still change monthly in response to global energy prices, but now the government will cover the difference of any increase that would have exceeded June prices, the committee said.