DUBAI (United Arab Emirates) July 12 (AP) : Mere years ago, fuel was cheaper than bottled water in the oil-rich United Arab Emirates. Now, long lines snake outside gas stations on the eve of price hikes each month.
Fuel prices in the major OPEC producer, set in line with global oil price benchmarks, have soared over 70% since Russia's invasion of Ukraine, accentuating differences with neighboring petrostates that heavily subsidize gasoline.
The contrast has stoked complaints among Emiratis who receive generous cradle-to-grave welfare and prompted the government to boost social spending for low-income citizens.
The UAE's relaxing of fuel subsidies in 2015, which had been costing the government billions of dollars, put the country at the forefront of long-delayed fiscal reforms in the region as oil prices slumped. Even now, Gulf Arab rulers getting a windfall from sky-high oil prices know it can't last forever, as the world's economies move away from fossil fuels.
"The UAE is really standing out," said Monica Malik, chief economist at Abu Dhabi Commercial Bank. "Its policy focus remains firmly on reforms."
At about $1.23 a liter, or $4.66 a gallon after July's price rise, the unprecedented fuel cost in the UAE remains below the grim records reached in the United States and Britain as the war in Ukraine unleashes the biggest commodity shock in decades. But the region's citizens have long considered cheap fuel a birth right. In Kuwait's lavish welfare state, the cost per gallon is nearly four times less.
"Everyone is complaining," said Emirati engineer Suhail al-Bastaki. "It's just too expensive."
Unlike for the rest of the world, the war is an unexpected boost to public finances for the UAE and its hydrocarbon-dependent neighbors. With the most diversified economy in the region, flashy Dubai has also benefited from an influx of wealthy Russians since the war.
But the recent price surge in the UAE has signaled the region is not immune to global market forces.
As pressure mounted last week, the UAE and Saudi Arabia allotted a combined $13 billion dollars in social spending for low-income citizens - an option clearly unavailable to the region's less affluent economies such as Egypt and Lebanon, where the price of bread is surging and hunger is spreading.
Still in the UAE, where expats outnumber locals nearly nine to one, fuel price hikes are costliest for legions of workers from Africa, the Middle East and South Asia who power the economy. Inflation has cut into laborers' already meager salaries, triggering a rare outburst of illegal strikes this spring.
Other Gulf Arab countries have also curbed state benefits to balance their budgets in recent years. But fearing backlash from angry consumers,
none have gone as far as the UAE, where fuel prices are nearly double the average among Gulf Arab states.
The country can get away with this partly because the burden falls on its 9 million expat residents, experts say. Meanwhile, in Saudi Arabia - a country of 35 million, two-thirds of which are citizens - the government's fuel price cap has kept inflation under control even as food costs have spiked.
"The impact is not really on the (UAE's) local population," said Nasser Saidi, an economist in Dubai. "They feel the fuel price increases, but they remain protected in terms of the social contract."
