Tuesday, July 8, 2008

Diesel queues have no end in sight

Diesel queues have no end in sight

THE NATIONAL July 07. 2008

Although petrol prices in the Emirates are among the lowest in the world, diesel prices at retailers other than Adnoc are among the highest. As a result, long queues of lorries have been forming outside Adnoc stations, where the pump price is less than half that of other fuel retailers. Drivers are waiting up to an hour to take advantage of cheaper fuel offered there and blocking traffic in the process.

Last month Dubai-based petrol retailers such as Emarat, Enoc and Eppco raised the price of diesel by 75 fils to Dh19.25 per gallon (US$5.24) while Adnoc’s has remained relatively constant at Dh8.60 (US$2.34). Unlike the Abu Dhabi-based Adnoc, the Dubai companies purchase fuel at international rates and thus are subject to the rising costs of crude. Over the past 18 months they have had to more than double the price they charge for diesel.

The long queues for the fuel at stations within Abu Dhabi’s city limits – which often spill onto busy streets – have created many problems, especially during the rush hour. Previous efforts to reduce the appeal of Adnoc’s diesel to lorry drivers have met with little success. When Abu Dhabi limited the amount of diesel that could be purchased to Dh50, lorry drivers simply drove off and rejoined the queue, exacerbating the problem. Now, on the advice of the road safety division of the traffic and patrols department, Adnoc stations in the city of Abu Dhabi will no longer sell diesel during rush hours.

Adnoc has 129 outlets in every emirate but Dubai – 80 of them outside Abu Dhabi. The same congestion problems have materialised in these emirates. In Sharjah, the police have begun fining drivers Dh400 for queueing along roads while limiting the sale of diesel to Dh100 to 300. Because of the lack of Adnoc stations, drivers are waiting up to three hours to be served, compounding the problem.

The situation is not sustainable, but the resolution will not be easy. While the congestion created is a genuine hazard that increases the likelihood of accidents, one must sympathise with transport companies struggling to remain profitable among numerous sky-rocketing costs. Nor can the Dubai-based companies, whose profits are being squeezed as a result of rising crude costs, be asked to keep their prices the same as Abu Dhabi’s. While the most obvious solution would be for Adnoc to build more stations throughout the UAE, that would amount to unfair competition with other suppliers.

What is clear is that the current measures do not address the root cause of the problem. As long as there is a significant price differential between Adnoc’s and the other companies’ fuel, there will be queues. Either Adnoc will have to raise its prices – highly unpopular – or provide its competitors with cheaper diesel – highly expensive. Even that will be difficult as Abu Dhabi’s refining capacity is under strain. There are likely to be queues for some time.

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