Font Size

- Aa +

Wed 13 Jan 2010 07:02 AM

Font Size

- Aa +

Pump up the prices

We should all support ENOC's call for fuel price caps to end, but for other reasons, says Andy Sambidge.

Like most Western expats, I still get a thrill when I visit a service station to top up the fuel in my car. Even after 18 months in Dubai, I struggle to keep the smile from my face as I hand over the meagre AED60 to fill the tank.

But should I be smiling? Am I not the reason why Dubai, the UAE and the wider Gulf region has such a shocking record for protecting our planet.

This week, the managing director of the Emirates National Oil Company (ENOC) called for government price controls on fuel to end. His reasoning was a financial one - for every fuel sale, his company was losing money because petrol is just too cheap.

But it started me thinking...shouldn't we all support a rise in fuel prices - not to help out ENOC but to protect the next generation of UAE residents.

Isn't cheap fuel at the core of the UAE's carbon footprint problem and shouldn't we all as individuals work towards making the country a greener place?

Surely a rise in fuel prices should be the first step taken by the government to discourage car use and get us using other modes of transport. It might not stop most people using their car each day but it would be a start.

The Dubai Metro, which opened last September, is pretty popular but think how much more successful it could be if commuters thought twice about turning the ignition key in the morning. With the rest of the Red Line stations due to open next month and the Green Line to start operations before the end of 2010, the rail network will provide a genuine alternative to the car for most commuters.

Whenever I return to the UK, I joke with my parents about the price of petrol in Dubai - it was more than GBP1 a litre when I was in England for Christmas with media reports suggesting it was only going to increase in 2010 while here a litre is as cheap as water.

Yes it's nice to pay as little as possible for essentials but that's the point, should we consider fuel for our car an essential anymore when the world is supposedly in such a poor state environmentally.

If the region is serious about reducing its carbon footprint - and the likes of the $22bn Masdar City planned for Abu Dhabi suggests it is - then it should take action to affect the largest number of people possible. What better way than hitting the pockets of every car owner in the land?

It might wipe the smile off my face as I leave the garage forecourt but Mother Earth will be happy.

For all the latest retail news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
dubai resident 10 years ago

Its easy to joke about petrol prices with your friends and family overseas, however they are equally 'shocked' to know some of the over then top prices such as rents in the UAE. The cost of living is very high as is and it will only push it up further. Its naive to think about hike in petrol prices limited to your personal car use. It impacts everything such as higher distribution costs etc and the prices going up in the super market. There is need to 'educate' people to make 'better informed decisions'.

King-Male 10 years ago

Its a suggestion.. but not a nice one. Its so easy for someone to talk. and write such a silly thing which doesnt make sense. see how a simple feedback in the previous comments open your eyes.

I hate hypocrites 10 years ago

Let's look at the subject of petrol pricing from financial, economical, and environmental point of views. Financial: if u divide the petrol production chain into so many pieces and u want every single step to be profitable, the petrol will be so expensive people will start using it as a perfume, I mean look at the big picture. from exploring to digging to shipping to refining to distribution... over the big picture.. the UAE would be making profit even if the petrol is sold for half the current price, seriously. Economical: petrol is so important for any sector that a price hike will affect virtually everything, everything will simply follow. It's not that housing, education, communications or pretty much anything else is cheap here. Environmental: to keep it short, USA and China alone claim over 43% of the global CO2 footprint, the entire Arab world claim less than 4%, yes FOUR PERCENT, the UAE alone claim 0.5%. so if the USA reduces its footprint by as little as few percentage points it's like the entire Arab world stops breathing, I do care about the environment, and I hate waste, but lets be realistic guys. how about applying extra customs to all those 4x4s in the streets. I think adnoc should buy enoc, and reduce the petrol prices. let's have one BIG company controlling the BIG picture, this way the petrol would be cheap, and the company would be profitable. After all guys, we live in in an oil rich country, right? And to arabian business guys... give me a break.

The Pundit 10 years ago

I am always surprised by how so many folks like to ask that the "other folks" shoulder their share of reducing pollution but then won't even do their little bit. @ I hate Hypocrites - It's well and good that the US and China and Europe (can't forget them) and so many others have high carbon footprints but you are in the UAE and can do your own, personal, little part to decrease the UAE's carbon footprint. If you aren't willing than it is up to the market economy to force you to do so. @ I Hate Hypocrites (again) - Your breakout of the financial costs for the production of gasoline was flawed, flawed, flawed. 1. The cost of developing an oil field is expensed over years, often 50 or more, that means that the costs associated with bringing the oil out of the ground is pennies per barrel, hence the lower overall barrel price. 2. The cost of REFINING the petroleum product into gasoline is one borne by an outside agency (the UAE does very little refining into automobile fuel) and that has to be recovered. Basic accounting rules dictate that bringing the oil out of the ground is one P/L and selling it as fuel is another. All the petrol stations in the UAE operate at a loss...very poor business acumen. @ Dubai Resident (from Sydney Australia) - Puhlease, yes, raising fuel prices could cause inflationary pressures but let's be realistic. Lower fuel prices in Saudi (much lower, btw) and the price of milk is the same there as it is here. Might there be other market forces dictating the cost of a gallon of milk? Of course there are, 'cause it isn't just fuel. I support the increase in the price of fuel. It should be AED 12 or more per gallon. After all, why is it AED 6? Let ENOC make some money. Want to do your part? As your company to subsidize NOL tickets for the metro (our company does) or maybe even run a company bus (tried it, not a good option!). Small things are a good start...and raising the price at the pump while painful will be a very good thing.

His Excellency Dr Paul 10 years ago

I agree completely with the article. Forcing local oil companies to effectively lose money on each liter they sell is ludicrous, even aside from the environmental impact. The fact they make money elsewhere and can afford it is irrelevant. If they have spare cash and make a saving if the price cap is abolished, then I am sure they can be required (or persuaded) to contribute that extra cash to a worthy cause. Certainly something more worthy that subsidizing me to drive my 4x4 gas guzzler. Those who complain about rents and other costs... I fail to see your logic. Why should oil companies be forced to provide subsidized petrol because your landlord wants too much for the apartment you rent? Surely that is not their fault? How would you like it if your business was forced to sell at a loss for similar reasons? Better to deregulate and let the market find the right price for everything (assuming that proper markets are allowed, and it is not just a carve up between major government owned companies of course).

kingkaiser 10 years ago

I dont disagree with the fundamental premise, which is to use price to shift activity to environmentally friendly ones. However, there are significant concerns... 1. Walking / cycling is difficult for a number of reasons. First, sidewalks arent fully developed and there are no cycle tracks. Second, the temperatures here for 6 months out of the year are unbearable when wearing a suit, and many in this country aren't in professions where either light clothing or body odor are acceptable. I personally love walking and 4 months of the year (when the weather is good), I take the 45 min trek to work, but I am grateful for vehicles in the other 6-8 months. 2. Given the above, the solution is public transport. However, buses are rarely on time here and are usually packed so you have to wait for the next one (40 mins later; at least for the route I was taking from Bur Dubai). The metro is a phenomenal step forward, but without feeder buses, you need to take an cab to get there if you dont live very near a metro station. When they sort all this out (which will take time due to the complexity and lack of precedent here), the public transport system may be worth considering; at present it is not. 3. Prices here can be lower than international prices without the govt incurring losses. Remember that part of the cost of fuel is the transportation and storage (according to Saudi Arabia in a WTO hearing, this comprises 30% of the cost). This transportation / storage cost will likely be MUCH lower when shipping oil from Abu Dhabi oil fields to the UAE's cities. It would be good of the state to pass these savings on to residents to keep costs low (many commodity producing countries do the same for their major industries), and to increase competitiveness of local industry. However, if it is loss-making, then perhaps some increases may be justified. 4. The inflation concerns have merit. If the past few years have taught us anything, it is that corporations here will try to keep margins high, and will pass costs on to consumers. So the Saudi milk that is currently priced at par with KSA may be at a premium.

Dan 10 years ago

@ His Excellency, you say: “Better to deregulate and let the market find the right price for everything (assuming that proper markets are allowed, and it is not just a carve up between major government owned companies of course)” I agree with you but a lot of business in UAE is monopolistic and don’t let the market to set the price. Just look at communication, rent price setting, retail import and so on. Maybe now you see why people complain about rents and other costs. When competition is allowed in the market, than I’m with you.

Tony Jalet 9 years ago

Oooooh yes I agree, let's raise the price of petrol by 500% so that no one apart from the very rich can use their vehicles. Then while we are all stood in huge line waiting for the bus, we will all be able to marvel at the almost empty roads, the streets now only graced by the luxiourious presence of the rich, passing by in their RollsRoyce, Bentley, Ferrari and Lambourginis, it woud look so pretty. And while we are at it, why not also put restrictions on air flights. Every single international air flight uses thousands of gallons of fuel and there are no Catalytic converters on a plane (which remove polluton from or car exhausts and which people talking about environrmental issues, so conveniently forget) so the vast ammount of daily pollution from all those flights goes directly into out ozone layer. Therefore restrict airflights down to one flight per person per year and decrease pollution on a huge scale! This all sounds daft yes? Well so does increasing fuel prices in an attempt to stop people using their cars everyday. While I agree, companies should not be making a loss, (although we all know they are not, in the grand scheme of things) only an idiot, or someone wishing to make more money from fuel, would assume that raising the cost of petrol prices would help protect the environment. Take a look at the UK for example, where petrol costs almost £1.20 per Litre now, over $10 a gallon and yet there are more cars on the road than ever before. 'Driving' up petrol prices, only serves to line the pockets of the rich oil owners and the governement, while at the same time depriving those poorer people who cannot afford such an increase, the opportunity to use their cars. (or if they must by necessity use their car, taking away money that would be much better spent on their children). People who can afford to pay more for fuel, will always use their personal vehicle to travel to work etc. Who wants to sit on a bus next to some, fat smelly, ignorant individual, just to get home after a day at the office. Worse still, imagine the arduous task of a ride on a bus, followed by a tram ride, and a ten minute walk home, while carrying your weekly shopping!!! Sound fun? Then maye you should try it before suggesting raising fuel prices.. Furthermore, some journeys by public transport can take people over an hour longer to get home than by car and longer still with delays. I would suggest that the advocaters of such rediculos notions, (usually people who could afford to pay an increase in fuel prices and who would never use public transport anyway) spend one month using walking, bikes, busses, trams and trains etc, as their primary means of transportation, before they start babblling on about increasing petrol prices. You can rest assured , that should prices rise, the only people who will not be using their cars everyday, will be those people too poor to afford the price increase and the pollution will continue. Then the government will jump on the environment TAXATION bandwaggon and before you know it, you too, will also be paying extortionate rates for fuel, just to visit your relatives in the next town. If you seriously want to stop people using their cars, without stripping cash from their pockets and putting more in the oil barons or governments, use your brains and put vehicle restrictions on the city areas, improve the link systems so people can leave their cars etc and then without little inconveniece, be quickly and safely taken to their destination. As a final note, all of this hype about fuel affecting the planet is propoganda and nonsence when you look at the reality and availablility of non polluting energy sources. Do you realise that the technology to use water as a fuel source, has been around since 1890!! But developing it further is restrricted by the oil barons! Furthermore there are many innovotive and amazing ways of powering vehicles in ways that do not harm the environment, without using oil derivatives etc, but the inventive Patents for such methods are constantly being purchased by those, making money from increasing petrol prices. So such vehicles are never seen on the roads. In a land receiving, many countless hours of blazing sunshine everyday, in order to truly protect the evnvironment, surely it would be better to have a major campaign and a prize for the inventors, of the best solar powered methods of transportation? The technology is out there, avoid ripping people off and polluting the environment at the same time, by putting road restrictions in place or encouraging research and the production of environmentally friendly cars, it's really very simple.

Paul 9 years ago

Tony - that massive rant you've typed isn't actually an argument against raising petrol prices, it's an argument for improving public transport. There are plenty of places around the world where the public transport system works. You can get from anywhere in London to another place in London in less than an hour for no more than 20Dhs - considerably cheaper than driving, and also considerably quicker as well. Seriously, millions of people around the world manage to do just fine with public transport and in fact prefer it for its convenience and cheapness - provided the system works. There's no reason the same thing can't be achieved here, but more work needs to be done. The Metro and bus system in Dubai simply isn't fit for pupose at present and the Wojhati journey planner is a joke. Start sorting these things out and things would be a lot cheaper and easier.

The Pundit 9 years ago

Tony, Tony, Tony, did you get up on the wrong side of the bed yesterday? I'm not going to delve deeply into Tony's conspiracy riddled diatribe against "rich oil owners and the governement" [sic] but I will comment on a few points: - As Paul mentioned, there are countless cities in the world where Public Transport works (Chicago, NYC, Washington, London, Paris, Moscow, Tokyo, to name but a few) and those trains are occupied by the rich, not so rich, and definitely not rich. - The amount you pay for fuel today helped drive more fuel efficient cars and cars that produce less pollution. So yes, raising the price of fuel did help the environment - The amount you pay for fuel today does NOT line the pockets of the "rich oil owners and the governement" [sic]. Those increased prices are almost always related additional taxes applied which help your government run. Yes, there are price increases when the price of a barrel of oil goes up but those increase fluctuate whilst the taxes stay with us, day in and day out. - Your premise of using solar powered cars is flawed for so many reasons but I will only touch on two. 1. You cannot generate enough power with solar panels on a car. This is due to two simple problems...surface area and storage area. 2. Solar power is not a good source of alternative energy in this region. Yes, they have lots of sun but they also have lots of sand and dust. To be effective the solar panels must be 100% clean else they lose their effectiveness in a dramatic fashion. NOTE: This increase in price has nothing to do with getting cars off the road and everything to do with stopping money losing operations. Let the price increase begin!