Kuwait increases gas prices by 83% after fuel subsidy cuts

The Kuwaiti government is hiking the price of premium gas by 83% after it decided to scrap generous fuel subsidies. Mid-grade and regular gas prices will rise by 62% and 42%, respectively.

The country was forced to act after the fall in crude prices slashed government revenues across the oil-rich Gulf. Fuel and food subsidies have been cut across the region, and new taxes have been introduced.

Kuwait, which makes the vast majority of its revenue from the oil and gas sector, approved a package of economic and financial reforms in March, including a 10% tax on company profits. The fuel price rise was approved by the government this month.

The United Arab Emirates (UAE) was the first Gulf state to target fuel when it introduced market prices for gas last year.

According to Moody’s, regular gas will cost US$0.28 per liter (about US$1.06 per gallon) after the subsidies are removed, which is still way below prices in other Gulf nations such as the UAE, Oman, Bahrain and Qatar. The price is less than half of the price of comparable gas in the US.

The move will test the Kuwaiti government’s determination to reshape the economy. According to analysts at Moody’s, price hikes for diesel and kerosene in 2015 were partially rolled back in the face of protest. “The government’s ability to successfully implement the price hikes this time around will be indicative of its institutional capacity to move its economy beyond oil,” the analysts wrote in a research note.