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Tue 14 Jun 2011 08:29 AM

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Oil giant Total to help ease UAE fuel shortage

Company wins Emarat's tender to buy extra 100,000 tonnes of gasoline from June to Sept

Oil giant Total to help ease UAE fuel shortage
Emarat petrol station
Oil giant Total to help ease UAE fuel shortage
Oil giant Total to help ease UAE fuel shortage

Oiil major Total has won a tender issued by the UAE's fuel
retailer Emarat to buy an extra 100,000 tonnes of gasoline from June to
September, traders said.

Petrol stations in the oil producer have experienced fuel
shortages this month and traders said this has likely increased demand and
prompted the tender.

OPEC member UAE relies on imports of gasoline to meet
domestic demand.

Total will be paid a $9 premium to the average monthly Brent
price, a trader said.

The world’s third largest exporter of crude oil saw at least
six days of fuel shortages this month after supply woes saw petrol pumps at
ENOC and EPPCO stations across the country run dry.

The shortfall, which the company blamed on filling station
upgrades, was likely a reflection of the gap between fuel prices and the
heavily subsidised cost at the pump, analysts said.

Enoc and rival retailer Emarat have suffered from rising oil
prices because they buy fuel at market prices and sell it at government-set
rates. The UAE has long subsidised fuel prices in an effort to cut living costs
for residents, at a cost of millions of dollars each year

“It is more likely due to a shortage of funds,” said Samuel
Ciszuk, energy analyst at IHS Global Insight. “This is quite a common problem
in a system where the retail price is fixed and where the main entity is an
importer of fuel or feedstock.”

In January, Emarat chairman Obaid Humaid Al Tayer said the
company was restructuring and needed bank loans because it must sell gasoline at
below-market prices.

ENOC said in April it expected to spend AED2.7bn ($735m)
this year on providing fuel subsidies. The figure represents a 44 percent rise
from the AED1.5bn it spent in 2010.

John Sfakianakis, chief economist at Banque Saudi Fransi,
said fuel retailers may find it untenable to continue selling fuel if the price
shortfall is not addressed.

“It appears that the retailers don’t find it commercially
viable to keep running, despite the fact that we have seen price increases by
around 30 percent in the last year at the retail level.”

*With agencies

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SAM 8 years ago

It is only fair that gasoline prices should rise (or fall) to the same level as that of Iran, Kuwait, Qatar or Saudi Arabia. Otherwise, what is the purpose of the GCC? Prices for gasoline charged at the pump in EU and North America is 80% tax, so such prices should not be used for comparison. At any rate, price increases will increase cost of living and doing business over here and for all action there will be consequenses.

Fact 8 years ago

The entire fuel distribution in UAE should be taken over by ADNOC, if the petrol crisis has to be solved.
It is well known that Dubai, Sharjah and other states do not have abundance of oil like Abudhabi. When Abu dhabi takes care of the budget of UAE excluding that of Dubai, they can easily solve the petrol issue in other states

Punky Brewster 8 years ago

Petrol is abundant in Abu Dhabi, and yet, DXB imports fuel from Intl' markets. I'm sure if they can talk it out, a price can be agreed to, and the balanced fuel supply chain can be restored. This is ridiculous in an oil exporting country that there is rationing of fuel. Please work things out and keep this country UNITED, for real!!

Marcellus Ramone Kelley 8 years ago

There is a plethora of energy sources we have barely scratched the surface with!

Telcoguy 8 years ago

And yet for automobiles you have surprisingly few... Animal pulling, steam, petrol,alcohol, electricity. Please choose one and explain how the UAE could implement it.
@punky, the petrol you get from thevwell and the one you pu in your car are slightly different. AFAIK there is not enough refining capacity, specially at the artificially low prices that subsidies impose.

Kuruvilla Zachariah 8 years ago

What is absurdly interesting is the question as to why some petroleum retailers in the UAE, an oil producing and exporting country, HAVE to sell petroleum in their local market at international prices! To put it into perspective, it is like saying that dates should be sold in the local UAE market at international prices or coffee should be retailed in Brazil at international prices. If it is from the profits made on petroleum sales in the international market that the local petroleum price is subsidised, then why cry "losses"? That's a very skewed perspective. It is only reasonable for the residents of this land to expect that local prices on commodities like oil and dates would be much lower than that in the international market, is it not? The only way to end this nonsense is for ADNOC to gain permission to retail petroleum products in all the markets of the UAE.

Ali 8 years ago

Well said. Unfortunately textbook economists will shout you down by saying subisidies are bad and that every commodity should be sold at the exact same price in every country.

sandpiper 8 years ago

What happened to the reportedly massive oil discovery in Dubai of 2009 ? Things have gone very quiet on that front.

Telcoguy 8 years ago

Please Ali, share with us all those "real life" examples of how great subsidies are good for the economy of a place. I am sure you may have dozens of them that show how wrong "text book" economics is.
As such an expert in economy as you seem to be, I am sure you are not confusing your personal preference for cheaper oil with the economic effectiveness of subsidies.

Ali 8 years ago

Subisides may not be good, but neither are monopolies, currency manipulation, anti dumping laws, import restrictions, restrictions on labor movement etc.
Yet all countries implement one or more of such measures for their own good.
As long as all other countries are not following suit, a country that stops all subsidies and removes any and all trade restrictions will only suffer, and that is why there is no major country that doesnt have restrictions or subsidies of some sort or the other