Rising fuel costs accelerate Abu Dhabi consumer price inflation

The government last month changed the way it calculates fuel prices, effectively reducing subsidies. Christopher Pike / The National

Consumer price inflation in Abu Dhabi rose above 6 per cent annually for the first time since 2009 last month, driven by the rising cost of fuel.

Inflation rose to 6.1 per cent last month, up from 5.4 per cent in July.

That was the result of a 12 per cent rise in transport costs against the previous month – the result of a spike in fuel costs.

The Statistics Center Abu Dhabi did not provide an annualised inflation rate, but the figure was calculated from data provided by the government agency.

These figures are the latest indication that the rise in the cost of living in Abu Dhabi is accelerating. Abu Dhabi was rated the world’s 33rd most expensive place to live in an annual survey earlier this year, rising 35 places up the ranks.

That reflected how rising housing, schooling and utilities costs ate into living standards for residents.

The government last month changed the way it calculates fuel prices, effectively reducing subsidies.

That led to a 24 per cent spike in the cost of 95 octane unleaded petrol to Dh2.14 per litre, up from Dh1.73 per litre the previous month. Diesel fell by 29 per cent to Dh2.05 per litre.

The higher petrol price had a bigger impact on consumer price inflation because of the prevalence of petrol as a fuel for private vehicles in the UAE.

Diesel is used by heavy transport and the logistics industry. The diesel price fall lowers prices for producers – which may or may not be passed through to consumers.

The petrol price and diesel price both fell this month. Petrol fell to Dh1.96 per litre – a drop of 8 per cent against last month’s prices. Diesel fell by 9.3 per cent.

One reason for changing the method of calculating fuel prices now is that the oil price has fallen from close to US$110 per barrel in July to $42 per barrel as of mid-August, making the impact of reducing subsidies on consumers less onerous.

Rents in Abu Dhabi have also continued to rise, putting further pressure on prices in the emirate. A report published last month by the real estate research company CBRE said that the emirate's rents were the second-most expensive in the world, with the average household spending $2,649 per month on rent.

The research company JLL called on developers to focus efforts on building more housing for middle-income families as rent growth continues to outpace salary growth.

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