UAE fuel deregulation: Is this the end for the SUV?

With new petrol prices from August 1st, we investigate what effect the expected hike could have on the country’s driving habits.

Neil Churchill July 27, 2015

Updated 28 July, 14:30.

The news all UAE motorists feared most was announced last week. No, not that indicating will be made mandatory. That the country’s fuel prices will be deregulated.

Starting August 1st, prices at the pumps for petrol and diesel will rise in accordance with a new policy linked to global prices. The price of Octane 95 (Special) will increase by 24 per cent to AED 2.14 per litre; Octane 98 (Super) will go up by 23 per cent to AED 2.25 per litre; and Octane 91 (E-plus) will rise to AED 2.07.

As assumed, the price of diesel will fall from AED 2.90 to AED 2.05, a drop of 29 per cent. 

In time, it is believed the deregulation will help to offset the decline in oil revenue and boost the UAE’s economy. It is also seen as a way to reduce fuel consumption – a study by the World Bank recently named the UAE as the most polluted region in the world.  

So does this spell the end of the country's love affair with SUVs and gas-guzzling muscle cars? Will ‘miles to the gallon’ become the new buzzword for UAE motorists, replacing ‘horsepower’ and ‘V8’?

In short: no. Not immediately anyway. The rise of 24 per cent for Special may sound like a lot, but it is only 42 fils per litre more than what the price is currently. Given the UAE's cost of petrol was already very low on world standards, a rise of less than half a dirham per litre should not be too shocking.  

However, the newly formed fuel committee will announce the adjusted prices each and every month, meaning that in a year's time, the price to fill up your 3-litre SUV could be significantly higher than it will be after the first adjustment in August. It may be 24 per cent now, but what if it's 24 per cent every month? If you never took an interest in the price of oil before, you may want to start, as the global cost will play a big part in determining the price from now on. 

uae fuel police bmw i8.jpg Dubai Police has added an eco-friendly BMW i8 to its supercar fleet.

While the decline of the SUV may be in the distant future for now, what is more likely is the rise of the eco-friendly car. Carmudi, the vehicle marketplace, says that after studying data from its classifieds website, UAE drivers are shifting towards greener rides. However, only 1.88 per cent of car listings currently on the company’s site in the UAE are for eco-friendly vehicles. 

That said, there have been clear signs in the country that eco-friendly vehicles are being encouraged. Dubai Police unveiled an environmentally friendly section of their fleet last year, including a BMW i8 among several electric mini cars.

The Roads and Transport Authority (RTA) recently announced that 200 hybrid taxis will be on Dubai’s roads by the end of 2015, while earlier this year 16 charging stations for electric cars were opened around Dubai, with another 84 planned by the year-end.

Our advice for all you gas-guzzling car owners – there is no need to knee-jerk and put your 4x4 up for sale immediately, the rise in fuel prices will most likely be slow and steady. But do consider your car's depreciated value in a year or two year’s time when the cost of petrol will have (potentially) risen for 12, or 24, consecutive months. How many people are going to be in the market for a hungry SUV then?