Rising oil price squeezes margins at state-owned petrol company
Subsidies will cost Emirates National Oil Company (Enoc) a total of $1.14bn over the 2010-11 period, as the state-owned petrol company is unable to pass on rising oil prices to its customers at the petrol pumps.
Last year, the discrepancy between crude and petrol purchases on the international market and the price of subsidised petrol amounted to $408m, said the company in a report published by UAE newpaper The National.
This year the company expects the costs of subsidies to rise by an additional 80 per cent to $735m.
Dubai, like many of its UAE and GCC neighbours, subsidises petrol, as well as power and water. Prices of light sweet crude for June delivery are currently at almost $114 a barrel.
Enoc receives part of its crude from the Dubai’s own production, which it is able to refine at its own refinery in Jebel Ali. But the emirate’s consumption exceeds its production, forcing Enoc to buy from the international market.
The company had previously complained about the unsustainability of cheap petrol and the government responded by hiking prices by 27 per cent. Despite the increase, petrol in Dubai still sells far below international prices.
According to Enoc, the company is still profitable, saying its financial results for last year and the first quarter were “positive”.