Fuel price hike set to affect UAE

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The UAE government has a history of subsidising consumer fuel prices. Photo - Arabianoilandgas.com

Last week Emirates National Oil Company (ENOC) announced that the company is suffering from fuel shortage and may not be able to keep up the fuel supply in the country at heavily subsidised rates while its costs were on high in the international markets.

”Fuel prices in UAE are less than the international market and it is time to make adjust prices according to the international market. This is a continuing discussion between ENOC and the federal authorities,” Thaddeus Malesa, an independent energy analyst in the UAE, said. “Enoc is saying we should all be operating like private companies, and the Abu Dhabi government is saying no, especially in light of the Arab Spring and inflationary forces coming from food prices, the UAE-based analyst added.

It is a well known fact that escalating fuel prices effects every aspect of life, from raw material costs to transportation, from consumer goods to real estate.

EFFECTS OF FUEL PRICE HIKE

Economists and car dealers from all over the country believe that plans of increasing fuel prices will push UAE drivers out of gas-guzzling sports cars and sport vehicles. Michael Ayat, chief executive of Arabian Automobiles, said increase of fuel price will always hit “specific types of dealers and buyers”.

“This will not reduce the number of vehicles which are sold, but the customers will move their choices, maybe to smaller cars or more economical cars including a downsizing from eight-cylinder to six-cylinder”, the head Infiniti dealer added. Long-range commuters traveling alone would be most affected, he said. “For a guy who is commuting between Dubai and Abu Dhabi, which is the customer who has to take this into consideration.”

Mahmoud Samara,regional manager General Motors, said UAE’s subsidised prices have encouraged consumers to buy big, powerful cars and trucks with poor fuel-efficiency. He added that a major shift away from such vehicles “is not going to happen overnight”.

Rising oil prices will send food prices even higher. The oil factor, which has so far not been a driving factor this season, could become an element later on, said the secretary of the FAOs Intergovernmental Group on Grains Abdolreza Abbassian.

Fuel is an essential need for farmers, hence rising fuel prices may influence directly on production costs.

Fuel price hike does affect the country’s economy but not everyone has the same perception when it comes to the UAE. Robin Mills, a Dubai-based energy analyst, said: This is a wealthy country where people can afford to pay market prices for fuel. And when you have this cheap fuel it just encourages congestion, waste and pollution.

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