Diesel prices fall 10%

Diesel prices in Dubai are down more than 10 per cent from their peak, easing inflationary pressures on the economy.

Diesel prices in Dubai are down more than 10 per cent from their peak in July, easing inflationary pressures on the economy, but hauliers are still feeling pinched by new quotas on diesel sold by the Abu Dhabi National Oil Company (Adnoc), which chargeshalf as much Dubai retailers. Rates at Enoc, Eppco and Emarat filling stations in Dubai and the northern Emirates have fallen to Dh16.75 (US$4.56) a gallon from a high of Dh19.25 in July.

The fall in the price of diesel - used in everything from transport to electricity generation to cement manufacturing - could help slow price increases that have pushed the inflation rate well into the double digits, according to Fabio Scacciavillani, an economist at Dubai International Financial Centre. But the fall in prices will have little immediate effect on transport companies, which pass off the profit gains by reducing the rates they charge customers. The firms are more affected by the sharp differences in diesel prices across the country, according to the general manager of one of the country's largest haulage firms.

"Within minutes of reaching the office, customers are demanding rate reductions, so there is no real benefit either way," said Selwyn Burbridge, of Oman Transport Enterprise. "The main issue is the disparity between Abu Dhabi and Dubai - at Dh16.75 we are still paying almost double!" Enoc, Eppco and Emarat say they pay market rates for their fuel, and were forced to drastically increase diesel prices this summer as the price of oil closed in on $150 per barrel. Adnoc, however, was able to keep prices frozen at Dh8.60 a gallon throughout the oil price spike because it produces diesel from its own crude at refineries in Abu Dhabi.

Petrol prices, which are fixed by the federal government, held at Dh6.25 per gallon for regular grade in all stations. The significant difference in diesel prices drove up demand at Adnoc stations, leading to long queues in which lorry drivers waited for hours to buy fuel in Abu Dhabi and the northern Emirates. In response, Adnoc announced quotas on diesel sales at the beginning of the month. Starting Aug 14, drivers were required to present an electronic card at Adnoc stations, and were restricted to specified monthly volumes depending on the weight of their lorry. At the time, Adnoc said heavy vehicles would be limited to 1,500 gallons per month, but Mr Burbridge said the quotas have in practice been enforced on a day-to-day basis.

"The daily quota is only 50 gallons, which is certainly not enough for a double-shifted vehicle covering upwards of 800km per day," he said. "The daily quota cannot be carried forward to the next day, and is only for the vehicle specified on the card." Mr Burbridge said the limits have played havoc with the pricing scheme of his company, which has 280 employees and operates over 300 vehicles. "Every little bit helps, but try explaining to a client that his first 500 kilometres are at one price and after that the fuel price doubles," he said. "Worse still, when it is different customers utilising the vehicle between day and night, who gets the cheap fuel?"