UAE panel proposes cut in local fuel prices

UAE panel proposes cut in local fuel prices

Fuel prices in the United Arab Emirates are too high and should be brought down to match levels in other Gulf countries according to a proposal by an advisory council's committee, daily newspaper Gulf News said on Monday

May 7, 2012 3:45 by kippreport

Fuel prices in the United Arab Emirates are too high and should be brought down to match levels in other Gulf countries according to a proposal by an advisory council’s committee, daily newspaper Gulf News said on Monday.

“The petrol price in the UAE is the third highest in the Arab world after Syria and Tunisia, which does not fit a country that is ranked seventh in the world with an oil reserve of 97.8 billion barrels or 6.65 percent of the world’s oil reserve,” the paper quoted the committee’s report as saying.

The committee suggested fuel prices in the UAE, one of the world’s top five oil exporters, should be brought down either by a direct cash subsidy for Emiratis or a general subsidy for petroleum products.

The Federal National Council (FNC), the government’s advisory body which cannot initiate new legislation, is scheduled to debate the proposal on Tuesday. It has to vote before submitting the proposal to the OPEC member’s cabinet.

“Emiratis are a minority and a majority of the population will benefit from the proposal,” the paper quoted the FNC speaker Mohammad Ahmad al-Murr as saying.

Heavy gasoline subsidies are a common feature of the Gulf cradle-to-grave welfare systems. The UAE, which has not been affected by a wave of social unrest sweeping the Middle East over the past year, raised fuel prices by 26 percent in 2010.

The UAE caps its gasoline prices at 1.72 dirhams ($0.47) per litre, a fraction of what retailers pay to buy it from global markets and well below prices in Europe. For example, the average British retail price rose to a record high last month of $2.23 per litre.

“High prices of petrol and fuel heavily affect lives of people with low and medium income, not to mention the country’s development as a whole,” the paper quoted Ahmad Ali al-Za’abi, a member from Sharjah, as saying.

At $0.16 a litre, Saudi Arabia offers the second cheapest fuel price in the world, after Venezuela, while Qatar’s heavy subsidies allow it to sell fuel at $0.19 a litre, well below the Middle East average of $0.56, according to World Bank data.

The UAE’s oil minister Mohammed bin Dhaen al-Hamli initially opposed the debate, arguing that the government’s subsidy is already at 1.20 dirhams per litre and retailers have been making losses since 2003, the paper said.

“Losses of the four fuel distribution companies caused by a subsidised petrol price reached 8.5 billion dirhams in 2011, while the expected losses this year were 12 billion dirhams,” Hamli was quoted as saying.

In June last year a shutdown of some fuel stations by Dubai’s government-owned Emirates National Oil Co (ENOC) and its subsidiary Emirates Petroleum Products Co (EPPCO) forced people in the northern emirates to drive for kilometres to find a functioning station and then wait for hours in queues to fill their tanks.

Dubai’s government said in a prospectus for its recent bond issue that subsidies payable to ENOC and EPPCO totalled 5.59 billion dirhams ($1.5 billion) at the end of 2011.

The UAE, whose per capita income of $48,200 is one of the highest in the world and where locals and expatriates alike enjoy driving gas-guzzling sport utility vehicles, has raised public pay and military pensions over the past year.

It has also pledged to invest $1.6 billion in improving infrastructure in the less developed northern emirates and introduced food price controls.

(Reporting by Martin Dokoupil; Editing by Greg Mahlich)