Dubai gas company questions cut-rate fuel
DUBAI, United Arab Emirates -- When its gasoline pumps started going dry in the United Arab Emirates' poorer northern states earlier this year, Dubai's oil company blamed mysterious service upgrades.
Few believed that at the time, and now the company is dropping its subtlety, triggering an uncharacteristically public spat over fuel pricing policies.
By letting its farther-flung stations run empty, the Emirates National Oil Co., or ENOC, was telegraphing a message: The Dubai government-owned firm was tired of driving itself deeper into the red by shouldering money-losing state fuel subsidies that keep pump prices artificially low.
In a strongly worded statement over the weekend, the company said that continuing to cover subsidies mandated by the UAE's federal government "is clearly not sustainable or viable for the company." It was a rare public display of power politics in a country where grievances, particularly ones involving the many businesses controlled by the Emirates' ruling sheiks, are typically resolved behind closed doors.
The rift highlights Dubai's determination to maintain its independence within the UAE federation despite a daunting debt bill, and it throws into question the generous subsidies the country uses to help buy political stability.
Regular gasoline sells for 1.72 dirhams a liter in the UAE, or $1.77 a gallon. That's a little more than half of what drivers pay in the United States, and a fraction of what it costs Europeans to fill up.
"Providing cheap fuel to its population is what makes Dubai attractive as a trade hub," said Christopher Davidson, a lecturer at Durham University in England and an expert on the UAE. "We're reaching a point where Dubai can no longer manage to do that itself." The UAE as a whole is OPEC's third-biggest oil producer, sitting atop 97.8 billion barrels of crude.
ENOC says it expects to lose 2.7 billion dirhams ($736 million) this year. As a result, it is struggling to expand its network to keep up with demand. Dubai gas stations remain stocked but are often packed with long lines during rush hours.
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