Tuesday, 5 July 2011

ADNOC - The Winner Takes It All?

Container of GasolineImage via WikipediaGulf News certainly has the bit between its teeth on the ENOC Group story. Today's paper asserts that 'sources in the oil sector' have said the UAE government is 'moving to cancel licenses owned by ENOC and EPPCO in the northern emirates and allow ADNOC to take over the running of the service stations.'

That this move is being discussed seriously is hardly a surprise after the past few weeks' shenanigans, but the discussions (at least, those Gulf News reports) are remarkably wide-ranging. Apparently, the ENOC Group has been arguing that the fuel price should rise to realistic market rates - that would treble the price of petrol in the UAE. Although such a rise in fuel prices would be felt at the pumps, the issue is much wider than that. As a component in economic cost, petrol is an insidious little critter. If the cost of transportation of goods went up commensurately, we'd see some serious rises in commodity prices here, something that nobody really wants right now. Even the suggestion that UAE Nationals receive a petrol subsidy was apparently rejected - and quite, right too - they wouldn't be immune to the rise in the price of basic foodstuffs and other daily needs that would be triggered by unleashing a 300% increase in petrol cost.

Besides, if Abu Dhabi's ADNOC can profitably refine fuel at the current capped prices, why buy the stuff on international markets at all?

However, worryingly, for the last three days my local ADNOC hasn't had any Masafi, just Al Ain water. Please don't tell me this whole scenario is about to be repeated in the bottled water sector - I only drink Masafi...
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Anonymous said...

None of these companies are winners; ADNOC is most probably not happy they have to deal with Sharjah's problems now.

The entire problem lays with why Abu Dhabi doesn't supply oil throughout the entire UAE (maybe 10-20 years ago when Dubai actually had petrol it was a different story), but now Abu Dhabi should be supplying petroleum throughout the UAE. The cost to them would be negligible as it would only factor in true production costs.

Luke said...

Would cost them a fortune as this oil would otherwise be sold to the world at market price.

Seabee said...

Additional undercover support for Dubai gov't from AD gov't Alex?

ADNOC (read Abu Dhabi Government) takes the losses on selling petrol at the subsidised rate throughout the northern emirates.

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