The Gulf Cooperation Council (GCC) has discussed the possibility of imposing unified fuel prices across the GCC nations. This prospect was discussed yesterday in the 32nd Petroleum Cooperation Committee meeting held yesterday at the GCC headquarters in Riyadh, Saudi Arabia.
GCC is a political and economic union of Middle Eastern states and includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE. Of these six nations, three are also members of the OPEC (Organization of Petroleum Exporting Countries). These six countries have a combined production of crude oil of approximately 17.3 million barrels per day.
Figure 1: GCC crude oil production (million barrels per day)
Standardize prices of all oil products across the GCC
The idea is to standardize prices of all oil products across the GCC in order to offer better prices to the oil retailers. This would ensure consistent pricing in the region and would discourage the smuggling of oil products to neighboring countries in order to procure better prices, which is estimated to be 30 percent of total fuel consumption in Saudi Arabia.
“A unified market for petroleum products could exist within the next six years. Such a decision could be implemented only after services for public transportation projects in GCC countries become effective. Most residents in these countries use their own means of transport. Petrol and diesel enjoy the support of both Saudi Arabia and Qatar, which makes for much lower fuel prices compared to other GCC states,” stated Rashid Abanami, a reputed oil analyst.
Oil prices in UAE are much higher than the prices in other GCC nations
However, it also has to be noted that the oil prices in UAE are much higher than the prices in other GCC nations, who are also exporting across the globe. Uniform prices would mean the price of these exports would rise and no cheap fuel would be available from these six oil giants whose combined crude oil production is 18.6 percent of the global total. This could lead to a fuel price hike in some countries and an energy led inflation.
The executive list of draft regulations in the common law on GCC mining, energy reports for GCC countries and the results of their meetings with economic partners of other countries and economic groups were discussed during the meeting. Mustafa Al-Shamali, deputy prime minister and minister of Oil in Kuwait, stated, “The list will be approved in the next meeting.”
No GCC countries have raised objections so far
A feasibility study is to be conducted on the unification of fuel prices and the results of this will be announced soon. “No GCC countries have raised objections so far, but objections may still emerge. The Kingdom’s position on the supply of the global market is known to everybody. We will do our best to meet the demands of the market,” said Ali Al-Naimi, the Saudi minister for Petroleum and Mineral Resources. “The market is in perfect condition now. Demand has been met and there is high supply. The Kingdom currently exports 12.5 million barrels.”