Wednesday, October 13, 2004

The Price of Oil

The price of oil has hit $54 a barrel. And I'm starting to get worried.

I've lived in Dubai for about 10 years, and one of its big plus points has always been the price of petrol (about $1.50 a gallon). You would think it is so cheap because the UAE is the world's 3rd largest oil exporter, and supplies about 10% of the global requirement.

Apparently this is not the case. The retail price of petrol is set by the Federal Government. The Government has not responded at all to the recent massive rises in the global oil price. Now it seems that two of the retail chains, Enoc and Eppco (both are owned by the same company, which is 40% owned by Caltex), do not have their own supplies and actually import the stuff from as far afield as Singapore.

Yesterday Enoc/Eppco announced that they will progressively stop selling petrol at their 160-odd stations by the end of October. They will still sell diesel, and most of their gas-stations have shops, oil and lube thingies and car washes, which will remain operational. They will shut down 10 stations at a time over the next month unless the Government ups the price. They are looking for a 50% rise.

Here's the thing: Eppco / Enoc have a virtual monopoly in Dubai - the only competition is Emarat, and off-hand I can only think of about 6 of their locations - all of them a very long way from where I live.

Here's the other thing: the Federal Government is based in Abu Dhabi. The major supplier there is Adnoc. Government folk in Abu Dhabi will not be hit by this action in the slightest, and therefore will not quickly respond to the pressure. Also they are going to be pre-occupied with Ramadan, which is expected to start on Friday.

For once, I sympathise entirely with Enoc/Eppoc - they say they are losing over $350,000 a day. They are basically being forced to sell petrol at a price that is much lower than they can buy it for. No business can operate like that. And a 50% price hike is not going to hurt the average motorist in Dubai. It's time for a bit of reality.

More reality next week, see ya!