Tuesday, July 1, 2008

Diesel price gap in Dubai and Abu Dhabi widens

Diesel price gap in Dubai and Abu Dhabi widens
By Himendra Mohan Kumar, Staff Reporter GULF NEWS Published: June 30, 2008, 23:37

Abu Dhabi: The latest price increase in Dubai will widen the diesel price gap in Dubai and Abu Dhabi to almost 123.84 per cent, which could have a worse impact.

Dubai oil retailers - Emirates National Oil Company (Enoc), Emirates Petroleum Products Company (Eppco), and Emarat have raised diesel prices to Dh19.25 per gallon effective from yesterday, a 4.05 per cent or Dh0.75 a gallon increase, oil industry sources told Gulf News.

Economists say, the huge diesel price differential in Dubai and Abu Dhabi is going to cost distortions in the market.

"Either Abu Dhabi prices have to go up, or Dubai prices have to come down," said Dalton Garis, an economist at the Petroleum Institute in Abu Dhabi.

"Instead of being on the road and delivering goods and services, trucks are queuing up in Abu Dhabi to get cheaper fuel, which is both a wastage of time and fuel as they have to do an extra trip just to fill up their tanks," said Garis. "This issue needs to be sorted out, quickly."


The huge difference in diesel prices has caused massive queues at the diesel pumps of Adnoc Distribution, the fuel retailing subsidiary of Abu Dhabi National Oil Company (Adnoc), where Dubai-registered vehicles are queuing up for cheaper diesel.

As matters stand, on Monday, the price of light, sweet crude for August delivery rose $3.46 to $143.67 a barrel on the New York Mercantile Exchange (Nymex), a new all-time high. The price of crude oil traded on the Nymex has more than doubled in a year.

The three Dubai oil retailers buy diesel at international prices and then adjust the local prices, based on the landed cost of the oil product.

On the other hand, Abu Dhabi due to having its own crude oil supplies and refinery has been able to keep fuel prices steady at Dh8.60 a gallon.

Abu Dhabi's own fuel consumption is negligible compared to the volumes of crude it exports and the cost of subsidising fuels in the emirate is more than covered by the steep increases in global crude prices, which are touching new record-highs, frequently.

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