Emarat, one of four gas retailers operating in Dubai, have run out of gas at some of its stations as the company struggles to meet its financial engagements, the Dubai-based newspaper Gulf News has reported.
The price of gas is regulated by the UAE government, which despite a 26 percent price increase this year alone, has forced the company to sell gas at far lower cost than what Emarat must pay to import oil. Dubai does not have any oil refineries, unlike neighboring Abu Dhabi that has two refineries and can control all aspects of production.
In addition to Emarat, Abu Dhabi National Oil Co. (Adnoc), Enoc and Eppco also operate in Dubai. All of these companies must sell gas at approximately $1.80 per gallon.
The UAE government of the United Arab Emirates offers a $0.33 per gallon subsidy on gas sales in the country, amounting to hundreds of millions dollars every year; however, in an effort to cut costs it decided earlier this year to scale back on such subsidies.
“It certainly is a problem across the Gulf,” Caroline Bain, senior commodities editor with the Economist Intelligence Unit told The Media Line. “It’s hard for retail companies to make a profit.”
Dr. Manouchehr Takin, a petroleum analyst with the Center for Global Energy Studies in London agreed with Bain.
“I haven’t heard about this case but it’s common in all countries where there is gas production and the government is trying to control the prices,” Takin told The Media Line.
While the UAE is the seventh largest oil producer in the world and is estimated to have the world’s fourth largest oil reserves, the oil is not spread equally across the seven emirates that make up the country.
The relative lack of oil in Dubai is often regarded as one possible explanation for why the country started to diversify its economy away from oil much earlier than surrounding countries.
One example of this forward thinking was the establishment of national airline Emirates in 1985, which helped to market the city as a tourist and logistics hub. Abu Dhabi followed suit in 2003, when it established national airline Etihad Airways.
