Business | Oil & Gas

Fuel prices may increase further

Petrol likely to be costlier by 15% and diesel by 20% if government subsidies are lowered

  • By Abdullah Rasheed, Abu Dhabi Editor and Ahmed Namatalla, Staff Reporter
  • Published: 00:00 April 26, 2010
  • Gulf News

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Abu Dhabi: The four government-owned petrol distribution companies are looking to increase their prices again next month by 15 per cent for petrol and 20 per cent for diesel, Gulf News has learnt, as efforts continue to lower government subsidies.

Sources at one of the petrol companies, speaking on condition of anonymity because the government has yet to make a formal announcement, said prices of the ‘regular' and ‘special' petrol grades are set to rise by Dh0.23 per litre to Dh1.64 and Dh1.75, respectively.

The imminent price hike is likely to include the highest grade super, by Dh0.15 per litre which was not part of the increase implemented earlier this month.

Diesel will also see a Dh0.25 increase per litre in the coming weeks, according to the company sources. Diesel is currently sold for Dh2.10 to Dh2.60 per litre.

The sources added the diesel price will be raised twice, once in May and again in June.

"Every country has its own policy with respect to subsidies," said Angad Rajpal, energy analyst at Prime Securities in Dubai. "Also the UAE does not have enough refining capacity. "Linking local prices to international oil prices gives [the government] a better way to manage end-user demand."

Highest

Petrol prices in the UAE are already the highest in the Gulf Cooperation Council countries including Oman and Bahrain, members with the lowest volumes of proven crude reserves.

The four government-owned distributors, Abu Dhabi National Oil Company, Emirates National Oil Company (Enoc), Emirates Petroleum Products Company and Emirates Petrol buy a combination of local and foreign-refined fuel, although the quantities are not released by the government.

The increase, if implemented, would put petrol prices in the UAE twice as high as their counterparts in Saudi Arabia and at more than 170 per cent of the prices in Qatar and Kuwait, according to the sources.

Earlier increase

Earlier this month, local distributors increased prices for diesel and all petrol grades with the exception of ‘super' by 11 per cent.

Consumers can expect to pay about Dh190 to fill the tank of a an average six-cylinder vehicle with the ‘special' grade, compared to about Dh150 now, according to Gulf News calculations.

"You have very high consumption because the price is subsidised," said Kate Dourian, Middle East editor for Platts, a global energy information and news provider.

"The likes of Enoc are paying international market prices. You can't carry on buying it at international prices and selling it below value."

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