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28 March 2024

Petrol could hit Dh10 per gallon this year

UAE residents should brace themselves for a series of petrol hikes this year as petrol firms have already got official clearance to sell at internationally accepted levels. (AP)

Published
By Karen Hart

UAE residents should brace themselves for a series of petrol hikes this year as petrol firms have already got official clearance to sell at internationally accepted levels.

“There is still a need to raise prices by at least 47 fills to reach the break-even cost of selling petrol to customers,” a senior official from a Dubai-based petroleum products company, said.

This is on top of the 35-fil price increase this year so far – 15 fils in April and 20 fils in July.

“The approval is there to raise the prices to international levels,” he told Emirates 24l7

 “The approval from the ministerial board was given at the beginning of this year. The board formed a committee, which negotiates with the petrol stations as to when and how much to raise prices. Petrol stations will keep on raising prices until they make a profit.”

The official said firms can break-even at Dh10 per gallon or Dh2.19 per litre. Currently, the basic grade of petrol still costs Dh1.72 at local filling stations. This will mean a hike of 27.3 per cent.

“We are now almost at Dh8 per gallon so if get two more increments this year then you will hit Dh10,” he said.

“Dh10 is a fair price. Enoc, Emarat and Adnoc would be happy if they received Dh10. Currently they make a profit from other businesses such as car wash services, but they are still operating at a loss in terms of petrol retail alone.”

“In addition to the market price of oil, you still have the operating expense, insurance, transportation and administration costs as well as the petrol station’s margin.”

The transportation sector has just raised their fees in response to the previous petrol price hikes.

The question remains whether taxis will hike their fees too.

Abu Dhabi this month has decided to charge a Dh1 for every 750 metres travelled, a 33 per cent increase from the previous Dh1 for every kilometre. Flag fares however remain the same at Dh3 during the day and Dh3.60 for night rides.

Sharjah on the other hand decided to raise the minimum taxi fare to Dh10 and tariff from Dh1 for every 650 metres to Dh1 for every 620 metres from September 1.

The starting fare will remain the same at Dh3.5 during the day and Dh4 at night.

In February, Sharjah hiked the tariff from Dh1 for every 800 metres travelled to Dh1 for every 650 metres. In December 2008, Sharjah Transport implemented a minimum fare of Dh20 for commuters travelling from Sharjah to Dubai.

UAE is currently the costliest for petrol in GCC at Dh1.72 per litre. Saudi Arabia petrol costs an average of 55 fils per litre, followed by Qatar at 70 fils, Kuwait at 95 fils, Bahrain at Dh1 and Oman at Dh1.51.

Energy analysts say government subsidies have resulted to massive and sometimes excessive usage of the expensive energy. They say the subsidy system is inconsistent with conservation and preservation.

According to the International Energy Agency (IEA), global spending on energy subsidies rocketed by 63 per cent to $557bn in 2008 from the year before, with Middle East Gulf oil and gas producers Iran and Saudi Arabia occupying first and third spots respectively among the world’s energy subsidisers.

The 2008 subsidy outlay of $557bn was a huge jump on the previous year’s $342bn global energy subsidy bill and while, given lower prices last year, 2009 should not be as expensive, the issue is increasingly dominating global and regional energy agendas.

Phasing out subsidies in 2011 to 2020, as agreed last year by the G20, would cut primary global energy demand by 5.8 per cent by 2020 and shave 6.5mn barrels per day off 2020 global oil demand, the IEA predicts.

Abandoning subsidies would reduce CO2 emissions by 6.9 per cent by 2020 – or 2.4 gigatons of CO2. This is equivalent to the current emissions of France, Germany, Italy, Spain, and the UK combined, the IEA said.