Kuwait is hiking gas prices by up to 83%

What the heck is OPEC?!
What the heck is OPEC?!

Drivers in Kuwait may be in for a serious case of 'sticker shock' as gas prices soar next month.

The price of premium gas is due to rise by 83% after the Kuwaiti government decided to scrap generous fuel subsidies. Prices for mid-grade and regular gas will rise by 62% and 42%, respectively.

Kuwait was forced to act after the slump in crude prices slashed government revenues across the oil-rich Gulf.

Fuel and food subsidies have been cut across the region, and new taxes have been introduced.

The United Arab Emirates was the first Gulf state to target fuel when it introduced market prices for gas last year.

Kuwait -- which makes the vast majority of its revenue from the oil and gas sector -- approved a package of economic and financial reforms in March, including a 10% tax on company profits. The fuel price rise was approved by the government this month.

Related: What it costs to produce oil

According to Moody's, regular gas will cost 28 cents per liter -- or about $1.06 per gallon -- after the subsidies are removed.

That is still way below prices in other Gulf nations such as the UAE, Oman, Bahrain and Qatar, and it's less than half what you'd pay for comparable gas in the U.S.

The move will test the government's determination to reshape the economy. Analysts at Moody's say price hikes for diesel and kerosene in 2015 were partially rolled back in the face of protest.

"The government's ability to successfully implement the price hikes this time around will be indicative of its institutional capacity to move its economy beyond oil," the analysts wrote in a research note.

-- CNN's Schams Elwazer contributed to this report.

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