Transport companies have accused UAE fuel retailers of hiking diesel prices to cover their losses from the discrepancy between high international petrol prices and the amount they can charge at the pump.
Diesel prices of three of the UAE’s four major retailers have shot up by 175 per cent in the past three years, putting pressure on fleet operators and adding to the inflationary spiral.
Abu Dhabi National Oil Company (Adnoc) has offered diesel at Dh8.60 per gallon for the past few years, while it is currently sold for Dh13.10 at Emirates Petroleum Products Company (Eppco), Emirates National Oil Company (Enoc) and Emarat filling stations.
In Saudi Arabia, the average selling price of diesel is Dh1.8 per gallon, more than seven times less than in most of the UAE.
As a result, transport companies have called upon the government to regulate the price of diesel the same way it administers the price of petrol.
Meanwhile, a top official from Eppco, who requested anonymity, denied the high price of diesel was an attempt to compensate for losses on petrol.
“We lose an average of Dh6 million every day in sales of petrol as we are selling it on much lower prices than the prices we buy it for,” he said.
“And the money we generate from the sale of diesel does not cover these losses at all. The price at which we are currently selling diesel is the cost price, which means we are not making any profit out of diesel.”
The price of diesel is not regulated by the UAE Government, and thus oil retailers Eppco, Enoc and Emarat meet and agree on the selling price of diesel based on the international rates, he added.
“The price of an oil barrel has increased to $112, and that is why we increase the selling prices to cope with this increase.”
In other GCC countries, he said, diesel prices are backed by the government and that is why diesel is being sold at cheaper rates in neighbouring countries.
A top official from Adnoc, who also requested anonymity, said the company has made the decision not to increase prices of diesel as the pressure would be too much for consumers.
“Currently, we are selling diesel at Dh8.60 per gallon, which is less than the international and local selling prices. We are bearing the costs.”
Meanwhile, Kamaran Ahmad, general manager of Fansy Transport Company, which operates 200 buses in Dubai, said the continuous diesel price hikes are making it difficult to do business.
“When prices of petrol increase, oil retailers pass the burden on diesel. This is increasing our operational costs by at least 70 per cent.”
He admitted the cost is ultimately passed on to the public, because in order to survive, transport companies must raise rates.
“In the end, this increases the costs on our customers. Officials must look into these issues and regulate the price increase the same way they regulate petrol prices, as prices have been increasing at least every month. Some consider the increase of 20 fils to 30 fils as not a massive increase, but for us it is.
“For example, when filling a tank of 18 gallons, if prices increase by 30 fils per gallon, then it is equal to Dh5.4 in additional cost. And if we have five increases in a year, then it is Dh27 extra for each bus, every time they fill the tank. About 90 per cent of our fleet run on diesel, and the increase in prices puts more pressure on us,” said Ahmad.
Shibu George, general manager of Clarion Shipping Services in the GCC, said costs of transport businesses in the UAE have doubled in the past two years, due mostly to the increase in prices of diesel.
“The cost of transportation is increasing beyond justification. This is mainly due to the frequent increase in diesel prices in the past few years.”
The cost of moving goods by trucks between the emirates, as well as the region, has shot up, he said. “About two years ago the cost of transportation within Jebel Ali was between Dh150 and Dh175. Today, it is between Dh400 and Dh450.
“Also, the cost of transportation from Dubai to Abu Dhabi was Dh700 to Dh750. However, today it has gone up to between Dh1,350 and Dh1,400. All these increases are putting pressure on us and increasing our operation costs.”
A source from Saudi Arabia Public Transport Company (Saptco) told Emirates Business the massive hike in diesel prices in the UAE has discouraged foreign operators from carrying out business in the country.
“Saptco operates around 3,000 buses between the UAE and Saudi Arabia, as well as some other GCC countries. Prices of diesel here have increased dramatically over the past few years, and to cope with this, we have changed our strategies a lot.
“Currently, we make all the bus drivers fill their tanks in the last filling station between the UAE-Saudi border to cut down the cost. This so far helped us a lot in facing the price increase.”
Jamal Al Marrai, Managing Director of Al Marri Land Transport Company in Dubai, shared similar views. He said the continuous increase in diesel prices makes it difficult for them to operate and forces operators to be savvy consumers.
“Diesel is being sold at a much cheaper rate in Adnoc filling station than in Dubai. This makes many truck drivers fill their tanks in Adnoc station rather than in Dubai.”
Black Market Of Diesel
According to sources, the sharp increase in diesel prices in the UAE compared to the other GCC countries has created a black market for diesel.
“Diesel is being sold at Dh1.8 per gallon in Saudi Arabia compared to Dh13.10 in Dubai. This has encouraged many truck drivers from Saudi Arabia to start illegal selling diesel in the emirate. Mainly, they drive trucks, which have a tank of 18-gallon capacity, and they fix a second 18-gallon tank in their vehicles. They use the first tank to drive to and from the UAE, and they sell the second tank’s fuel to diesel drivers here. This makes them a minimum of Dh1,000 in a few trips,” a transport company owner told Emirates Business.
He pointed out many of the Saudi drivers are caught and stopped on the borders, however, a large number still manage to smuggle the diesel and illegally sell it in the market.