SHARJAH, 14 October 2004 — Soaring international prices of oil have led to a serious crisis in the UAE retail fuel market, with two major distribution companies — Eppco and Enoc — warning they have no option but to close down their outlets.

The way out of the crisis is for the federal government to subsidize petrol for all distribution companies, and official sources said the move was under consideration. Another option is to lift a government ceiling on retail prices of petrol.

In the absence of either option, long queues could be found at the outlets of two other companies — Adnoc and Emarat — which say they would continue to supply at the current prices.

Crude oil prices have hit a 30-year high of $54 a barrel and hence the crisis.

For several weeks, petroleum retailers Eppco and Enoc have been complaining that they are losing 1.4 million dirhams a day as a result of a government ceiling on price of fuel. They say they buy a gallon of petrol for 6.4 dirhams and sell it at 4.75 dirhams as set by the government.

The price was set after the government allowed a 75 fils per gallon increase in April this year.

Eppco and Enoc, which account for 51 percent of the market share between them in Dubai and the Northern Emirates, are now seeking an increase of 1.75 to two dirhams per gallon.

Dubai and the Northern Emirates account for more than two-thirds of the registered cars in the UAE. Adnoc, the third major player in the market and which is owned by the government of the Emirate of Abu Dhabi, has said although it is facing a situation identical to Eppco and Enoc, it will not increase gasoline prices.

Jamal Al-Dharif, general manager, Adnoc Distribution, said in a statement that the company is committed to providing fuel at existing prices and will bear the losses to maintain the current prices as determined by the Ministry of Petroleum and Mineral Resources.

Emarat, the fourth retailer, says it will continue to sell at the prices set by the government. However, said a spokesman for Emarat, “all petrol retailers will suffer serious losses if the government does not subsidize the product.”

Eppco, in which Caltex owns 40 percent, said it had already taken a decision to close down 10 retail outlets for petrol — but will sell diesel — and the rest of the more than 100 other outlets will be closed before the end of October. It will keep open its convenient store and food outlets, and also offer car wash and oil-change facilities.

Enoc said it has also decided to close down its petrol outlets by the end of this month unless the government lifts the ceiling on petrol prices or offers subsidies to offset the company’s loss.

Sources said the government was aware of the problems and a decision to offer subsidy was expected to be announced soon.