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The Saudi government has increased the price of petroleum-based fuels as it seeks to reduce subsidies at a time of low crude prices (see p18). Significant increases to the price of gas improve the economics for its production, potentially boosting government efforts to promote it as a source of electricity in order to reduce ever-rising crude burn levels.
Although the Ministry of Finance has only broadly publicized prices for gasoline and natural gas, MEES estimates of prices for other fuels suggest that the finances of Saudi electricity generators could be significantly hit.
In particular, state utility SEC may remain reliant on government funding for its capacity expansion program, despite increased electricity prices. While the finance ministry has said further increases to electricity prices are planned, it will take time for the impact of the new pricing on SEC’s revenues to become apparent.
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