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Female Drivers To Boost Gasoline Demand In Saudi Arabia

Saudi Arabia, June 26, 2018

The addition of half the Saudi population to the current number of drivers will significantly boost gasoline demand in the Kingdom and, according to Bloomberg, could in fact bring in economic benefits almost equal to those expected from the listing of Aramco.

Saudi Arabia yesterday finally joined the rest of the world after for decades being the only country that barred women from driving. The end of the ban could add as much as US$90 billion to Saudi economic output, Bloomberg Economics has estimated. This compares to an optimistic estimate of US$100 billion in proceeds from the Aramco IPO, which has been delayed until next year.

“There will be more cars on the road,” Oil Minister Khalid al-Falih said. 'Women will be more empowered and more mobile and I think they will participate more in the job market over time, so I think it’s going to contribute to employment of females in Saudi Arabia. A secondary effect will probably be higher gasoline demand.”

Bloomberg Economics analyst Ziad Daoud agrees with him. “Lifting the ban on driving is likely to increase the number of women seeking jobs, boosting the size of the workforce and lifting overall incomes and output,” he says, but adds that “it’ll take time before these gains are realised as the economy adapts to absorbing growing number of women seeking work.”

Many see the removal of the ban on women driving an as the reform that will have the strongest reverberations in Saudi Arabia’s economy. At the moment, female participation in the labor market in the Kingdom is just 20 percent, which is much lower than even Saudi Arabia’s closest neighbors in the Gulf, where the average was 42 percent in 2016.

So, the boost in gasoline demand will likely just be the start of changes for the Saudi economy from the end of the decades-long ban. These changes will become especially important if the Aramco IPO never takes place as some observers of the Kingdom with a more skeptic bend suspect.

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