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Saudi Aramco has hiked retail diesel prices for 2024 by 53% to 1.15 riyals ($0.30) a litre from SAR 0.75, as part of its annual price adjustment.
While the world's oil producing company has raised prices for domestic consumers three times since 2016, the latest 53% jump is unprecedented. According to EFG Hermes Research, diesel prices have been reset at the end of each year since 2021 but increases in the last two years have been SAR 0.11-0.12 per litre.
"Impact on consumer names should not be that significant, in our view, as total transport costs are less than 5% of total cash costs for most names. Also, in comparison to 2016 this is not as relevant as prices of electricity, gasoline, etc. also rose significantly then and consumption trends are generally better now."
The most negatively impacted names will be fresh dairy producers Almarai and Nadec, "albeit not too materially", said EFG.
The impact on SADAFCO should be small (SAR6-7 million) given its smaller size of operations and distribution network, as well as fewer daily trips per vehicle due to the longer-shelf life of its products.
Other companies like Alamar, Americana, Herfy and Jahez which have relatively high transport costs, should see negligible impact as most delivery vehicles utilise gasoline as opposed to diesel, EFG Hermes said.
Meanwhile, even at the new higher price, diesel is relatively cheap in the kingdom. The UAE set diesel prices for January at 3 dirhams ($0.81) per litre, down from AED3.19 in December, as part of its monthly review of transport fuel prices.
(Reporting by Brinda Darasha; editing by Seban Scaria)
