When April’s fuel prices were announced on the final day of last month, queues formed at petrol stations soon afterwards. This contributor passed several outlets on March 31 where cars tailed back beyond petrol station slip roads in the afternoon, as well as much later in the evening, as midnight approached. Colleagues reported the same scenario elsewhere.
Why motorists might have sat in queues is a relatively simple question to answer. Many drivers will have seen or heard that prices were due to rise from Dh2.48 per litre of Special 95 in March to Dh3.28 per litre at the beginning of April and were no doubt keen to beat the increase before the clock struck 12. Others may have been there because their tanks were close to empty and they were filling up as normal.
The price that drivers pay at the pump for the following month has been determined by the fuel price committee at the Ministry of Energy for more than a decade. That price normally fluctuates by a few fils per litre per month and depends on prevailing market conditions. Those conditions were, of course, markedly different in March from previous months, hence the much larger swing than before and those queues forming on the 31st.
A prolonged period of indiscriminate attacks by Iran against its Gulf neighbours, beginning on February 28, and the illegal blocking of the Strait of Hormuz by Tehran created the conditions for sharp movements in the global price of a barrel of oil and, by association, prices at the pumps in the UAE. In addition, repeated attacks on energy infrastructure generated further concern. Crude oil prices accelerated in line with this repeated aggression and weeks-long disruption.
Taking the complex nature of the situation into account, petrol prices were always destined to rise in April. The previous time fuel prices hovered around Dh3.50 per litre was in spring 2022, when the Ukraine crisis was beginning and the price of oil was also above $100 per barrel. The historical precedent was clear in hindsight.
History also shows us that the oil shocks of record – whether in the early or late 1970s or more recent energy crunches – can prompt a swift shift in behaviour by consumers around the world. Some markets have price barriers that prompt those rapid changes. The $4 gallon in the US has a particular status in that regard, which was previously breached in the summer of 2022 and is back today. In the UK, historically, the consistent breaching of £1 a litre two decades ago stirred senses for motorists. There is not yet an equivalent figure for consumers in our market, but an expected jump in prices is usually a call to action wherever you are in the world.
Petrol prices are then one of the most obvious intersections any one of us has with the front line of global economics and possible inflationary pressures.
When looking at those queues at petrol stations in the UAE, consumer behaviourists might also identify some of what transpired at the end of the month as a rapid surge in activity driven by a distant strand of emotional contagion, which is the process of synchronising your emotions with those of the people around you or mimicking their behaviour. While queueing for petrol because others are waiting doesn’t neatly fit that description, our decision-making processes can easily be temporarily rewired by the actions of others.
Perhaps it also underlines that human beings often seek to find control in uncertainty – and one way to exert control is to stock up on fuel to beat a price increase. Similar activity was evident during the early phase of the pandemic when reports of, or speculation about, possible global supply shortages of certain goods prompted a rush of buying by consumers around the world.
More broadly, anxiety has also been a fixture for many of us over the past few weeks, as alerts, attacks and the real or perceived impact of geopolitical shocks rippled through our lives. It should be of little surprise that what might be a form of “pump anxiety” has also been evident during that period.
A new phase began in midweek, after the US indicated that a 10-point ceasefire proposal from Iran provided the basis for talks in Islamabad at the weekend. Oil dropped back below three figures shortly afterwards, suggesting higher prices at the pumps may be fleeting. Reports also indicate some ships were being turned back from the strait later the same day and Gulf countries continued to intercept projectiles launched from Iran despite the existence of a ceasefire, so uncertainty and higher petrol prices may also be with us for a while. Oil prices ticked higher on Thursday, too.
With both outcomes possible, the question of whether to stick-or-twist as your fuel tank empties and the end of the month approaches will be one motorists will have to consider in a few weeks’ time.
