By Andy Sambidge
More than 80 Enoc filing stations have halted operations after month-long fuel shortfall
The Sharjah Executive Council (SEC) has given oil firm Enoc Group 72 hours to resume operations across the emirate of face the potential closures of its filling stations.
The Dubai-owned company has until June 24 to comply and restore service at all its petrol stations, state news agency WAM said Wednesday, or the Sharjah Department of Economic Development is mandated to take all necessary action, including closing down Enoc and Eppco outlets.
A fuel shortage crisis led to 82 Enoc-owned filling stations in Sharjah, Ajman, Umm Al Qaiwain, Ras Al Khaimah and Fujairah, halting operations for a month.
Abu Dhabi National Oil Company (Adnoc) was this week ordered to “help solve” the fuel shortage at Sharjah petrol stations owned by its rival retailer.
State news agency WAM said Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi, had directed the emirate’s fuel retailer to step in over the petrol shortfall, which has also spread to other northern emirates such as Umm al Quwain.
The UAE’s third shortage in 10 months was initially blamed on maintenance at petrol stations owned by Enoc and its unit Eppco, an explanation rejected by Sharjah’s Executive Council.
The council earlier this month called for an immediate end to the fuel shortages and demanded Dubai-owned Enoc explain the “real reasons” for the shortfall.
But analysts say the problem lies in government subsidies, which look increasingly unsustainable as soaring oil prices drive up the cost of supplying fuel to customers at a cheaper, fixed price.
Enoc and rival state-owned retailer Emarat have suffered because they buy fuel at market prices and sell it at government-set rates. Enoc said in May it would have to meet an additional AED2.7bn ($735.3m) in 2011 to cover the cost of providing subsidised fuel.
Three of the UAE's four fuel retailers - Enoc, Eppco and federally-owned Emarat - have been making losses for years.For all the latest energy and oil 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.
I think it would be great if all these pumps can be seized and handed over to ADNOC who is definitely doing a great job in this situation. Holding the public hostage is definitely not the solution to ENOC's internal problems. It is really surprising that this was allowed to drag on for almost a month.
Isn't Emirates National Oil Company (ENOC) Dubai's national oil company therefore its state owned, maybe they can't afford to buy enough oil, so can only replenish their own filling stations. Therefore ADNOC have been instructed to bail them out in Sharjah. Selling petrol at less that you pay for it wholesale is actually damaging an already indebted Dubai economy.
To be honest the continued subsidisation of petrol and diesel prices is preposterous as the economy is not an accurate reflection of reality, the price has to go up twice at least this year.
Give the Emirati minority discount for private vehicles through their national identity cards by all means, but you cannot subsidise 85% of the population.
Even if you increased ENOC prices twice over in 2011 you would still not match the UK and Ireland at AED8.20 to 8.50 a litre.
Prepare for the attacks from the usual suspects :) Well, some expats will join too as people love cheap petrol.
I fully agree with you in principle, and so do most "textbook economists", to the chagrin of some readers. I differ on the details.
Targeted discounts sound good in theory, but they will open the door to arbitrage/gray market; you cannot simply have two different prices for the same commodity in the same market.
Emirate-level solutions will not work either, as Sharjah inhabitants for example will simply pop up in AD to refill (or some entrepreneurial characters will find a way to move the oil)
Cash handouts, lump, not linked to consumption, for Emirati families are the only workable solution.
Dubai spends roughly 50 bn dirham per year in different labor subsidies, that is simply not sustainable anymore
Telcoguy, why would ANYONE drive from Sharjah to Abu Dhabi for gas? The distance is no less than 60km, you really think that people would drive to the first station on the E11, drive some more for the first interchange and then drive back?? There are ADNOC stations throughout Sharjah too, so I don't know with what kind of logic do you propose this as a 'solution'.
Gas subsidies affect everyone, not just consumers. Raise gas prices and businesses will raise the price of their goods to compensate, and inflation insues. Do you know what inflation is, or are you - as usual - just posting for the sake of posting?
Oh, and by the way, why is it that people continue to bring up the UK/Ireland example? Remove taxes from the gas prices of these two countries and their prices would be similar to those in the UAE, if not cheaper. How about we compare UAE prices to those of Saudi, or Oman, or Qatar, where they are the highest of them all?
@mike, read "or some entrepreneurial characters will find a way to move the oil" it is called trade, in case you are not aware, and has been going on for a long time. Btw there is lot of people living in Sharjah working in Dubai, and living in Dubai and working in Abu dhabi simply that would kill an emirate-level solution.
Yes, subsidies affect everyon (as I mentioned Dubai subsidizes labor to the tune of 50 bn dirhams per year, fuel being an important component but not the only one) these subsidies are just masking low output per unit of labor, maybe it is time to move from a labor intensive economy to something different given that dubai lacks any competitive advantage in that game?
Not an easy transition, but unavoidable in many people eyes. Had not been because of developments in the region I think we would have seen a decrease on the level of subsidies
Finally I guess people bring uk or german prices to show that high oil prices can coexist with a productive economy. Not sure is relevant here, but it was probably one of the smartest taxes we got in Europe as it helped tom improve energy efficiency.
For the sake of clarity current UAE Price of petrol is AED 1.7 per litre. Fuel tax and VAT combine to make 60% of the price of a litre of petrol in the UK.
Therefore, 1 litre of petrol in UK is AED 8.20 less 60% tax = AED 3.29 per litre, roughly 48% more than equivalent price in tax free UAE. Inflation is a global affliction from which the UAE is not immune as it is a major importer, no economy can afford to sell petrol at less than cost these days.
I too don't understand why, with ADNOC stations all over Sharjah, that the supply problem isn't solved anyway?
UK/German prices are much less of an accurate comparison than Saudi/Omani prices.
One may argue that Saudi Arabia earns much more through export of oil, but Oman earns far less than the UAE and can somehow subsidize petrol without companies going broke.
For that matter even Kuwait & Bahrain have cheaper fuel as well.
The usual suspects always bring up prices in UK/Singapore/Haiti/Tonga, when comparisons should be made with countries with a similar economy.
As for Germany/UK being examples of productive economies with high oil prices, i dont know whether to laugh or cry at this compairosn. There are 101 differences between those countries and the UAE, I will start by mentioning just 1; the average salesperson there probably earns 6 times more than the salesperson here.
If oil stays above 100 (albeit unlikely), prices will go up eventually, its just that they will go up after 8-10 years and will not cost 6 dhs a litre as our economists here would want
This problem is not related to the ability of the UAE to subsidise the price of gas. Abu Dhabi can do so, via government owned ADNOC. The issue is that Dubai cannot afford to continue to subsidise the price of its gas. The gas shortage running for over a month is frankly an embarrassment to Dubai.
Dubai needs to think hard and quickly about the viability of running its own retail gas marketing operations in a market where the selling price is determined by Abu Dhabi.
If Dubai needs to sell assets to cover its debts, why not sell ENOC.
Subsidising any commodity distorts the economy, whatever the intentions, and is ultimately unsustainable.
I have been here over a decade and have noticed the adverse inpact of cheap fuel, including the running of inefficient vehicles, wasted journeys, low occupancy per car, avoidance of public transportation etc.
Other side effects include companies willingness to give cheap cars to employees, including fuel cards, rather than pay proper salaries! In return the staff abuse the vehicles at the weekend, or give car lifts or other jobs using the vehicle, at the company's expense.
Ultimately the company wins, keeping the car at the end of service and paying a smaller gratuity!
Of course the locals need to be subsidised - with free houses, land, water, & electricity, so why not fuel?