No relief for state petrol retailers

Raising petrol prices in the UAE is not on the cards and the government will continue to subsidise the state-set prices despite mounting costs, Gulf News has learnt. "The government has agreed to foot the entire subsidy on petrol and asked the state oil marketing companies not to talk about increasing petrol prices," according to a well-placed local oil industry source. Geopolitical situation "This is just not the right time for it, given the geopolitical situation in the region," he added. The UAE state oil marketing companies are losing an estimated Dh16.5 million a day on petrol sales as the difference between state-set prices and the cost of imports increases. The petrol grade which sells at Dh1.72 a litre in the UAE must be sold close to Dh3.20 a litre to reflect its true market price. As matters stand, the oil retailers are losing around Dh6.50 for every gallon of petrol sold. The country's petrol consumption is estimated to be slightly higher than five million litres per day. The current domestic price of petrol reflects international crude oil prices at about $55 a barrel, even though Brent crude oil futures yesterday on the ICE Futures exchange in London traded at $118 per barrel. Retailers The four UAE oil retailers — Adnoc Distribution, Enoc, Eppco and Emarat - are paid by the government to cover the cost of subsidies. Adnoc Distribution's subsidies are directly borne by the Abu Dhabi National Oil Company, while Emarat's operating budget is approved by the Ministry of Finance with additional subsidies borne by the Abu Dhabi government. The cost of Enoc and Eppco's subsidies is borne by the Dubai government. No price revision this year While the government allowed petrol prices to be revised twice last year, this year there has been no revision despite sharp rises in international crude and oil product prices. The state oil firms cannot unilaterally revise pump prices without the federal government's approval. Spokespersons for oil companies weren't immediately available for comment when contacted by Gulf News. Sensitive matter The price of petrol is a sensitive matter as price increases invariably stoke inflationary pressures with producers of goods and services tending to pass on the increase in transportation costs to consumers. The UAE petrol prices are well above those in Saudi Arabia and Oman. Last year, the UAE announced plans to gradually reduce subsidies on petrol, which cost the government hundreds of millions of dirhams a year, until prices match international market levels. While national subsidy figures are not made public, Abu Dhabi has spent an average of $6.5 billion (Dh23.8 billion) a year on various subsidies in recent years, from water to energy. Refineries While Abu Dhabi processes its own crude at its two refineries for petrol, Dubai has to buy all its petrol from outside. When the price of oil on the international markets shoots up, Dubai's oil retailers become particularly vulnerable as the difference between the purchase price and the local selling price of petrol widens. Total fuel for emarat Oil major Total has won a tender issued by the UAE fuel retailer Emarat to buy an extra 100,000 tonnes of gasoline from June to September, traders said yesterday. Petrol stations have experienced fuel shortages this month and traders said this has likely increased demand and prompted the tender. Total will be paid a $9 premium to the average monthly Brent price, a trader said. The specification is for high-octane 95 Ron gasoline and for around 25,000 tonne cargoes with the option of delivery into Sharjah, according to a copy of the tender document seen by Reuters. Emarat also has term contracts in place with BP and Vitol.