Petrol up for second time in three months

ABU DHABI // The price of petrol will increase by up to 14 per cent throughout the country from Thursday, the second time in three months the Government has allowed an increase. The 20 fils price rise on each litre of petrol sold in Abu Dhabi, Dubai and the Northern Emirates was announced yesterday by WAM, the state news agency, and was described as "part of the liberalisation of prices and their gradual rise".

The Government has allowed prices for the lowest grade of petrol, E-Plus, to increase by almost 28 per cent this year, pushing up costs for both consumers and businesses that rely on transport, particularly taxis. Many economists and energy experts say the relaxation of price caps is necessary to reduce wasteful consumption and improve the financial position of Dubai-based fuel retailers that import petrol at market rates.

The Dubai-based Emirates National Oil Company and its affiliate, the Emirates Petroleum Products Company, have repeatedly called for increases to reduce the huge losses they incur from selling fuel at the federally mandated price. "The announced rise comes within efforts to gradually mitigate accumulated and growing losses these companies are sustaining due to continuous surge in the cost of the product," WAM said, referring to the fuel retailers.

Before this year, retailers had seen no increase since 2005. Prices for all grades were increased in April by 15 fils per litre. The Abu Dhabi National Oil Company produces petrol from its own crude oil reserves and refineries. It does not face the same cost pressures when selling fuel at its stations. Under the new prices, a litre of E-Plus will cost Dh1.61, while a litre of Special will cost Dh1.72, about 65 per cent of the average price for unleaded fuel in the US. The UAE already has the highest prices for petrol in the GCC, suggesting it has heard the calls of economists to end generous subsidies.

Motorists at the Adnoc petrol station on Muroor Road in Abu Dhabi had mixed views on the hike. Some said the rate was already expensive and others acknowledged that prices in other countries were far higher. "Every two or three months there is an increase," said Hazza al Khamisi, a 24-year-old Emirati who works for the police. "If the prices of petrol will increase, then the prices of everything will increase. It will affect trade. If it was the petrol alone, I wouldn't mind."

Sandy Norman, a member of the Women's Auto Racing Club, agreed: "The increase will have a knock-on effect as shops will have to pay more for deliveries." She said the poor would be hurt the most by the increase, but added: "The reality is fuel is cheap compared to most home countries of western expats so we have enjoyed the cheap ride." David Podsadni, a 44-year-old Frenchman, acknowledged the same thing: "In France the price of gas is much higher, at least three times more. So for me it is not so high."

The region's economies have recorded some of the fastest rates of petrol-consumption growth in the world, increasing the region's carbon dioxide emissions - a major contributor to climate change - and reducing the amount of crude oil and refined fuel available for export. The Government's moves this year reflected the priorities of a new generation of leaders who want to end wasteful practices, said Abdulkhaleq Abdulla, a professor of political science at UAE University.

"The country would be better off with some rationalisation of consumption," he said. "There is a limit to things, and I would expect that from now on it's not going to be a free ride anymore." [e-mail] [e-mail]