Sharja fuel supply shortage attributed to Dubai Government’s debt
Dubai has halted supplying petrol to its neighboring emirates as subsidies on fuel prices press the city’s capability to service and repay debt.
The Dubai government-owned refiner and operator of service stations, Emirates National Oil Co. (ENOC) closed filling stations in neighboring Sharjah and limited supplies to other northern emirates last week.
Dubai has over $10 billion of publicly held debt maturing later this year, reports Bloomberg citing International Monetary Fund data. According to a government forecast, cuts of “subsidies and transfers” should increase by 50 percent to 2.67 billion dirhams in 2011 from a year ago.
It is unsustainable to continue maintaining below-market value retail petrol prices, while many government companies still remain cash strapped. There have been no price increases in U.A.E. yet, but International oil prices have been increasing and so has domestic consumption. ENOC’s cash-flow has been significantly affected, while the federal government refuses to reduce subsidies.
Authorities in Abu Dhabi did not agree last week to let petrol retailers increase prices. ENOC said in May it may have to spend 2.7 billion dirhams ($740 million) this year to cover the cost of selling gasoline and diesel at below-market prices. Oil prices have gone up to the highest since peaking in 2008. Oil prices averaged $94.60 a barrel in the first quarter of 2011 compared with $78.88 in the same period last year and $43.32 in 2009. Crude oil hit a two and half year high of $114.83 last month.
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