Business | Oil & Gas
Experts say petrol price cut in the UAE is unlikely
Despite a precipitous fall in international oil prices in recent months, prices in the UAE are unlikely to be cut any time soon as oil retailers' margins continue to be under pressure, say industry experts.
- By Himendra Mohan Kumar, Staff Reporter
- Published: 23:47 January 9, 2009
- Image Credit: Prasad Nair/Gulf News
- An Emarat petrol station in Bur Dubai. Oil retailers’ margins continue to be under pressure.
Abu Dhabi: Despite a precipitous fall in international oil prices in recent months, prices in the UAE are unlikely to be cut any time soon as oil retailers' margins continue to be under pressure, say industry experts.
Fuel prices in the UAE can only be changed by the Federal Government. Petrol currently sells in the UAE in a price range of Dh5.75 per gallon and Dh6.75 per gallon. The variation in prices is due to different fuel grades.
"The oil retailers probably are still losing money on gasoline sales as the prices at the pump are set by the state. There's an indirect subsidy from the Federal Government. Whether the oil prices are at $40 or $140 [per barrel], oil retailers cannot make profits from gasoline sales," Kate Dourian, Middle East editor of global energy information provider Platts, told Gulf News.
"I don't think the government will cut petrol prices now. If international oil prices fall below $30 per barrel, it may be possible," said Mohammad Amerah, an Abu Dhabi-based economist.
Spokesmen for the UAE oil retailing companies were unavailable for comment on the extent of their current per gallon loss on petrol sales.
In 2007, three Dubai-based oil retailers - Emirates National Oil Company (Enoc), Emirates Petroleum Products Company (Eppco) and Emarat - collectively lost more than Dh2 billion on petrol sales because the state-controlled prices of the fuel remained at a standstill at a time when global crude prices soared to unprecedented highs.
Since Dubai oil retailers buy the bulk of their petrol at market prices, they continued to bear the brunt of high international oil prices through 2008.
Abu Dhabi, on the other hand, due to having its own crude supplies and refineries, didn't touch gasoline or diesel prices in the emirate, even when crude prices on the international market shot up to an all-time high of $147.27 per barrel on July 11 last year.
Adnoc Distribution, a unit of Abu Dhabi National Oil Company (Adnoc), sells fuels sourced entirely from Takeer, the refining arm of Adnoc.
Dubai oil retailers, meanwhile, have cut diesel prices 13 since late July to reflect the fall in international prices at the local pump.
The retailers buy their diesel - a deregulated product in Dubai, at international prices and then adjust the local selling prices, based on the landed price of the oil product.
Crude oil futures on the New York Mercantile Exchange for February delivery in the US were trading below $44 a barrel in early trade on Thursday.
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