Petrol price hike to help cut distributors' losses

DUBAI - The petroleum sector in the UAE has been completely independent for a long time, the sector is liberated and completely open to the international markets.

By Khaled Abdulla And Ibrahim Taha

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Published: Sat 1 May 2004, 11:11 AM

Last updated: Thu 2 Apr 2015, 12:21 PM

Adel Al Shaar, sales and marketing vice-president for Emirates company, said: "The last cash subsidy given out by the UAE government to any local petroleum company was in 1984, since then the sector received no government contributions what so ever, which makes the UAE government adopt an open policy of economic liberation."

The petroleum industry has been facing lots of difficulties in the local market, these were initiated by the fluctuation of international prices.

Local companies have been buying their petroleum products according to international prices which incurred them lots of financial loses.

Therefore, this increase in gasoline prices helped these companies cover a huge portion of their loses assured Al Shaar. The increase in prices, adopted by the board of ministers, makes the petroleum sector more profitable and capable of sustaining growth independently.

The loses incurred by these companies over the previous years was tackled by diversifying the sources of income for these companies like natural gas which is used in large electricity stations, but this did not solve the problem because this diversity only help them break even for the shortrun.

Al Shaar said: "Companies in this sector gave the issue of diversifying the sources of income and the restructuring of the internal skeleton the company tremendous importance to sustain their position in the market and protect themselves from none affordable loses. The end user will be minimally affected by this increase in price but the transport sector will not be affected because they rely on diesel which price is liberated compared to gasoline," he added.

A government official pointed out that the loses in the previous three years deviated between Dh700 million and Dh1 billion which made lots of local petroleum companies cut down their hours of work, lay off a number of employees, and drawback on the quality of their service.

The difference between the international buying price and the imposed local selling price is the amount of loss incurred. Companies that are buying their oil on the international price are obliged to sell their products on a lower price in the local market thus placing them in very disadvantaged position.

A reliable source said: "Why doesn't the UAE government help its local companies by giving them lower prices of oil especially that the UAE is an oil producing country. The last time such a suggestion was proposed it was rejected by the UAE government while Oman's local companies are enjoying the low prices given to them by their government. A suggestion was proposed recently for petroleum companies to form a comity that coordinates with the ministry of oil to evaluate the prices every three month " he added.

Another reliable source said: "Petroleum companies should not hurry for another increase in gasoline prices clarifying that the decission for increasing prices was not a selfish reaction in fact it was the last resort to stop the loses incurred by these companies over the past two years."


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