Surge in diesel sales in Abu Dhabi after Dubai raises price

Abu Dhabi's diesel sales have more than doubled over the past month as its petrol stations remained flooded with trucks and other heavy duty vehicles who have been scared away by the continued rise in prices in Dubai.

Scores of large vehicles are seen queuing daily in and outside the emirate's petrol stations to get their share of heavily subsidised diesel, which is sold at less than half the price by retail fuel suppliers in Dubai.

The long queues, stretching to the main street, have prompted Abu Dhabi Police to ask the Abu Dhabi National Oil Company for Distribution (Adnoc-Fod) to shift its diesel services to stations outside the capital to resolve a burgeoning traffic jam problem.

Adnoc-Fod sources said the company has responded to the police request and instructed most petrol pumps inside the emirate to stop the diesel service.

Only two stations located in suburban Abu Dhabi are allowed to sell diesel and this has increased traffic jams in those areas. Cars are also finding it difficult to enter those stations to fill petrol.

"Over the past few weeks, we have been working extra hours to face this unprecedented rush by trucks, buses and other big vehicles who are taking advantage of their presence in Abu Dhabi to fill up their tanks with cheap diesel," said John Satesh, an employee at the petrol station near Defence Road outside the city centre.

"There has been a very large increase in our diesel sales and the sales at other petrol stations in Abu Dhabi as a result of higher prices in Dubai… I think our daily sales over the past month or so have more than doubled… in the past couple of days, the sales have increased further as most other stations stopped serving diesel after Adnoc instructions and the trucks were asked to go to Musaffah outside the city."

In yet another increase, Dubai-based oil retailers – Emarat, Emirates National Oil Company (Enoc) and Emirates Petroleum Products Company (Eppco) – decided last month to increase their diesel prices by 75 fils to push up the price of a gallon to Dh19.25, one of the highest levels in the world.

Within 18 months, diesel prices have more than doubled from Dh8.35 in January last year.

Adnoc, which controls Abu Dhabi's massive hydrocarbon sector, said it would not change its subsidised price of Dh8.60 per gallon, less than half the Dubai price.

Traders attributed the widening gap to the fact that Dubai-based companies receive their oil from the international market, where crude prices have rocketed above $145 a barrel. In contrast, Adnoc supplies its refineries with crude produced by its own companies.

The latest increase in diesel prices comes amid a surge in inflation rates and in domestic fuel consumption in the UAE because of an economic upswing.

From around 63,000 barrels per day in 2001, diesel demand in the UAE leaped to 94,000 bpd in 2006 and was expected to have exceeded 100,000 bpd in 2007.

Consumption is projected to surge this year due to a sharp growth in business and projects to maintain the country's position as one of the world's biggest energy consumers relative to its population.

Per capita energy consumption in the UAE was estimated at 85.3 barrels of oil equivalent per day in 2007, up from 68.5 boe per day in 2001. It was only second to Bahrain and Qatar in the Arab world last year. Total energy consumption jumped from around 65,000 boe per day in 2001 to 97,000 boe per day last year as a result of a steady rise in the economy and the population.

Abu Dhabi's refining capacity was estimated at around 485,000 bpd in 2007 and a major expansion project at its Ruwais refinery is expected to double output within a few years.

Ruwais refinery, about 250 kilometres east of Abu Dhabi, currently produces around 400,000 bpd, while Umm Nar's capacity is estimated at nearly 85,000 bpd.

According to the Organisation of Arab Petroleum Exporting Countries, the UAE's total refining capacity stood at 778,000 bpd at the start of 2007. But expansion projects and new refineries will push production above one million bpd in 2012.

In a report last week, the London-based Centre for Global Energy Studies said the UAE had the lowest subsidies on petrol and diesel among oil producers. It put the subsidies at $10 per barrel of petrol and nothing on diesel because it considered Adnoc's low prices as a policy of stable prices rather than subsidies.

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