Dry petrol pumps would seem an anomaly in the world's eighth largest oil producer. So why are so many in the UAE running on fumes?
As The National has reported in recent weeks, the Emirates is facing a vexing series of fuel shortages, especially in the north. Drivers in Ajman are abandoning their cars on the side of the road when they run out of gas. Motorists in Sharjah, meanwhile, are queuing for hours to fill up. Needless to say, road rage is mounting.
The problem has only been compounded by hazy explanations about why there are shortages. Some stations have blamed closures on maintenance and equipment upgrades, although there does not always appear to be work in progress. In April, Emarat blamed supply disruptions when its stations ran dry.
Station shutdowns are part of the problem, but clearly more is at play. Petrol subsidies are such a commonplace fact of life that motorists often forget that filling the tank would be far more expensive in most other countries. As an unintended consequence, artificially low prices mean that many people consume more than they would in an open market.
That maybe one explanation for the squeeze on supply. More significantly, cheap petrol can also adversely affect companies' bottom lines. If stations pay more for petrol than they are allowed to charge, profitsdisappear, supplies may be rationed and operating incentives lessen.
This is not a theoretical challenge. AsThe National reported last month, Dubai-based Enoc estimated that it would be hit with a Dh4.2 billion loss related to selling petrol below market cost. Emarat is also suffering. As long as price controls are in place, there should be consideration whether these companies need help to keep stations going.
But even a fuming motorist in Ajman might balk at a completely open market. Petrol subsidies distort the market, disrupt supply and encourage excess demand but they do keep people happy and prices cheap. The subsidies scheme is not likely to be abandoned soon.
What is clear is that better coordination and cooperation could prevent much of the problem before it occurred. If petrol stations are closed in one area, another one should be open nearby. If supply is limited, drivers should be notified before their tanks run empty. Most of all, stations should give a clear explanation of how much fuel is in the tank.
