UAE's price hikes boost gasoline flows from Oman

AL BURAIMI, Oman - Gasoline price hikes in the United Arab Emirates have boosted sales in neighbouring Oman this year as motorists cross the border to fill up on cheaper fuel, and some have begun to resell it to UAE firms.

By (Reuters)

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Published: Wed 15 Sep 2010, 7:11 PM

Last updated: Mon 6 Apr 2015, 9:30 AM

“We make about 12 trips a week up and down. We buy 500 litres at a time and carry it over to the UAE to sell to transport companies, construction and local car rental companies,” an oil trailer tanker driver said.

“They have a fleet of service vehicles and they get cheaper petrol from us. We can’t buy more than 500 litres a time because the border people may get suspicious.”

Governments across the world’s largest oil exporting region have long subsidised prices at the pump in an effort to cut living costs for residents and encourage economic growth regardless of fluctuations on the global energy markets.

But the UAE, the world’s third largest exporter of crude oil, began this year to phase out gasoline subsidies, which cost hundreds millions of dollars a year.

UAE gasoline prices have risen 26 percent since April, when the government introduced the first of two price hikes imposed so far. Neighbouring Oman has kept its fuel subsidies unchanged.

“I’m not surprised that this is happening, but if it continues and very large volumes are being smuggled I am sure that ADNOC (Abu Dhabi National Oil Company) will take action to prevent losses,” a UAE oil official said.

“This is an issue that we have to keep track of.”

There are no restrictions on the import of Omani gasoline into the UAE, but an ADNOC official told Reuters last month that the UAE government may hold talks with Oman to prevent the unregulated inflow of cheaper Omani petrol.

In July, the UAE’s neighbour Saudi Arabia, the world’s largest exporter of crude oil, investigated smuggling of subsidised fuel abroad.

Sales up

Gasoline sales surged on the Omani side of the border this year following the UAE price hikes.

“Our sales have been going up by 120 percent in the last 12 months due to a higher turnout of UAE nationals who come over to buy fuel on the border side of Oman,” said Raj Silva, manager of Al Maha petrol station near the Hatta border crossing.

Another Omani petrol station said its sales were up 50 percent since the UAE began price hikes that have raised the price of 95-octane gasoline to 1.72 dirhams ($0.47) a litre. The same volume of petrol in Oman costs $0.31 a litre.

“We save a lot of money every month,” said Suleiman al-Farhan from the UAE town of Hatta. I don’t come every week but fill up my jerry cans so I can drive here once a month.”

Some 80 kilometres (50 miles) south, Mubarak al-Salmi, 26, crosses the border every four to five days with his friends on the way from the UAE’s desert oasis of Al-Ain: “We save about 25 percent compared to the fuel prices in Al-Ain.”

The official at state-run ADNOC said last month a third price hike would take place in the first half of September but the firm later denied the timing.

The oil-exporting emirate of Abu Dhabi has spent an average $6.5 billion a year over the past four years on subsidies from water to energy, while Dubai has paid $1.7 billion.

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