Saudi Arabia set to hike domestic petrol prices by 80% in January

Prices are not expected to reach international levels until 2023 at the earliest

The world’s biggest oil exporter is struggling to cope with low prices (Getty)

Saudi Arabia plans to raise the price of domestic petrol and jet fuel in January, part of a programme to gradually eliminate energy subsidies as the kingdom seeks to overhaul its economy and balance the budget, according to a person with knowledge of the matter.

Petrol prices are set to increase by about 80 per cent, while the price of jet fuel will be raised to international levels in one go, the person said, asking not to be identified because the matter is not public.

Petrol and other fuels such as diesel, kerosene and heavy fuel oil, will see incremental price increases over several years, the person said.

Excluding jet fuel, prices won’t reach international levels until 2023 at the earliest, and potentially by 2025. Electricity tariffs won’t be increased directly, but will rise gradually with other energy prices, the person said.

Saudi Arabia’s finance ministry, which oversees the country’s subsidy reform programme, did not immediately respond to a request for comment.

The new plan represents a slower timeline for the removal of subsidies as the government tries to offset the impact of the measures on a struggling economy. Saudi Arabia first reduced subsidies in December 2015 after years of debate as oil prices plummeted.

Officials later said they would eliminate them entirely by 2020, part of Crown Prince Mohammed bin Salman’s Vision 2030 plan for the post-oil era.

The world’s biggest oil exporter is struggling to cope with low prices and spending cuts aimed at reducing a budget deficit that reached about 15 per cent of GDP in 2015. The economy contracted in the first two quarters this year.

Finance minister Mohammed al-Jadaan said in October that prices of some subsidised domestic energy products will rise to international levels later than previously seen. Authorities will not rush to balance the budget by 2019 to avoid hurting growth, he said. Next year’s budget will be announced on 19 December.

Bloomberg