“Saudi Arabia is forced to raise gasoline prices”, An Oil expert says

Mohammed al-Sabban, the economic adviser and oil expert, highlighted that Saudi Arabia is forced to raise gasoline prices on the local level, to rationalize energy consumption in the Kingdom.

“We are forced to do so because our domestic consumption, of which a part is unjustified waste, has exceeded the standard international averages, and this is attributed to the cheap prices" Sabban told The Riyadh Post.

He continued: “Our domestic consumption amounts to about 35 percent of our total oil production. This means that we need to allocate more of our production to domestic consumption and subsequently we gradually lose our export capacity in addition to other advantages”.

The oil expert emphasized that keeping the same prices would cost the government the difference in production cost between the local and the world markets saying: “The cost of producing our oil is not only measured by the expenses we spend for the production and refining of one barrel, but is measured by what is known as the "opportunity cost" which is the difference in the net gain when we sale this barrel of oil in the world markets instead of the local one”. “That's the real cost. We push our government to forgo such opportunity to sell oil for the world price".

 Sabban explained that the actual cost of producing Saudi oil is averaged 9 $ per barrel, and the average cost of refining the barrel does not exceed $ 2 per barrel, which is very low in relation to global rates, "but it is not  and should not be a criterion for local pricing ."

In a related context, the oil expert pointed out that the process of raising prices should be based on a careful study of its effects, noting that "any trial to reform fuel prices should not be done haphazardly, but on the basis of studying all the negative effects on society and the completion of the public transport network until there is an available alternative for the average citizen and after studying the best ways to compensate all social classes for any price rise that also need to be reviewed periodically . "