Fuel prices in the UAE will be deregulated from 1 August, according to the national news agency WAM.

This implies that domestic pricing for gasoline and diesel will be linked to global prices starting next month, and marks a major departure from fixed gasoline and diesel prices.

The new policy is expected to result in slightly higher price for gasoline and lower price for diesel over the short-term.

The UAE’s Ministry of Energy said it made the decision in line with its strategy to support the national economy, lower fuel consumption, protect the environment and preserve national resources.

The new policy has been ratified by the UAE cabinet, which also approved the setting up of a fuel price committee that will conduct a monthly review of fuel prices against average international levels prior to their implementation.

UAE’s Energy Minister Suhail al-Mazroui described the policy as a result of in-depth studies that fully demonstrate its long term economic, social and environmental impact.

“The resolution is in line with the strategic vision of the UAE government in diversifying sources of income, strengthening the economy and increasing its competitiveness in addition to building a strong economy that is not dependent on government subsidies,” said Al-Mazroui.

Besides the economic and environmental benefits, the deregulation of fuel prices is expected to encourage UAE residents to adopt fuel-efficient vehicles including the use of electric and hybrid cars, as well as use public transport.

The transport sector is understood to have accounted for 22 per cent of the total greenhouse emissions in the UAE in 2013.