RIYADH, May 1: With oil prices sky rocketing all around the globe, Saudi Arabia has announced fixed pricing for long-term crude contracts and slashing domestic petrol prices by almost 30 per cent. Late on Sunday, Saudi King Abdullah issued a royal decree reducing petrol prices by more than 30 per cent.

“In order to improve the living standards of citizens and for the public good, we have ordered that the price of one litre of petrol for the consumer be changed to 0.60 riyals (17 cents) instead of 0.90 riyals (24 cents) until December 31, 2006”, said the royal decree.

The price of one litre (0.26 gallon) of 95-octane petrol was also cut by 25pc to 0.75 riyals (20 cents) and that of 91-octane petrol for consumers has been brought down to 0.60 riyals from the current 0.82 riyals. The price of diesel fuel has also been slashed by almost 35pc to 0.25 riyals (6 cents) per litre.

In another significant development, the Saudi government also gave its green signal to fixed crude pricing for longer term on a contractual basis for all consumers at all distribution centres. Some three weeks earlier, the Saudi cabinet had also decided to reduce bench prices for heavy and other crude oils in the kingdom. The Saudi cabinet meeting decided to revise crude prices every five years in the light of international energy prices.

“Prices will remain same for 10 years for clients who sign a long-term purchasing contract with Saudi Aramco,” the cabinet said, adding that the period would be calculated from the date on which the contract was signed.

In order to improve the living conditions of the poor sections of the Saudi society, the Saudi king also approved plans to build 16,000 low cost houses in various parts of the kingdom at a cost of Sr2.4 billion. In the subsequent phases, spread over a four-year term, the government plans to build a total of 64,000 housing units for the poor. A total sum of Sr10 billion has already been allocated for the entire project.

The move to reduce oil prices came as Western consumers of the world’s leading oil producer and exporter were facing sharply increased prices at the pumps amid record high crude prices. US President George W. Bush ordered a federal investigation into what has caused fuel prices to rise at least 25 per cent in the US over the past month.

US Energy Secretary Samuel Bodman warned that high fuel prices for consumers were here to stay for the next couple of years Saudi Arabia has been investing heavily to increase its production capacity launching a processing plant in March that raised its daily production by 300,000 barrels to 11.3 million barrels. Its goal is to raise its capacity to 12.5m barrels per day by 2009.