UAE Petrol Prices Set to Reflect Volatile Global Oil Markets

The UAE is set to announce its September petrol prices on Monday amidst volatile global oil markets. The country's fuel prices have traditionally moved in sync with international benchmarks, but not always.

Giovanni Staunovo, a commodity analyst at Swiss bank UBS, explained that several factors influence monthly fuel costs, including snow and river water levels. He noted that crude oil and refined product prices are correlated, with refinery margins playing a key role.

However, disruptions in the Middle East, China, and other countries have resulted in reduced refinery runs, contributing to price volatility. The UAE's deregulation of fuel pricing in 2015 has allowed for an efficient method of determining pump prices, tying costs to global oil markets with a monthly review mechanism.

Ahmed Zaheer, a consultant at Dubai-based Qamar Energy, pointed out that the UAE fuel price committee benchmarks against international averages for refined products over the preceding weeks, with an approximate one-month lag factored in. This means that a dip in global oil prices during a certain week won't show up at the pump until weeks later and is diluted by other cost components.

Other countries have different mechanisms for setting fuel prices, with taxes playing a significant role in Europe. Some governments have implemented price caps or temporary subsidies to mitigate high costs. Joseph Dahrieh, managing director at brokerage Tickmill, noted that these measures do not make the underlying cost disappear but transfer it from motorists to the government or taxpayers.