Dubai gasolene company questions cut-rate fuel

DUBAI (AP):

When its gasolene pumps started going dry in the United Arab Emirates' poorer northern states earlier this year, Dubai's oil company blamed mysterious service upgrades.

Few believed that at the time, and now the company is dropping its subtlety, triggering an uncharacteristically public spat over fuel pricing policies.

By letting its farther-flung stations run empty, the Emirates National Oil Co, or ENOC, was telegraphing a message: The Dubai government-owned firm was tired of driving itself deeper into the red by shouldering money-losing state fuel subsidies that keep pump prices artificially low.

In an unusually strongly worded statement over the weekend, the company said that continuing to cover subsidies mandated by the UAE's federal government "is clearly not sustainable or viable for the company".

Keeping its independence

It was a rare public display of power politics in a country where grievances - particularly ones involving the many businesses controlled by the Emirates' ruling sheiks - are typically resolved behind closed doors.

The rift highlights Dubai's determination to maintain its independence within the UAE federation, despite a daunting debt bill, and it throws into question the generous subsidies the country uses to help buy political stability.

Regular gasolene sells for just 1.72 dirhams a litre in the UAE, or US$1.77 a gallon. That's a little more than half of what drivers pay in the United States, where gas now averages US$3.46 a gallon, and a fraction of what it costs Europeans to fill up.

"Providing cheap fuel to its population is what makes Dubai attractive as a trade hub," said Christopher Davidson, a lecturer at Britain's Durham University and an expert on the UAE. "We're reaching a point where Dubai can no longer manage to do that itself."

The UAE as a whole is OPEC's third-biggest oil producer, sitting atop 97.8 billion barrels of crude.

Like other Arab monarchies and sheikdoms lining the Persian Gulf, it has long lavished its oil wealth on government handouts, including cradle-to-grave health care, cheap utilities and generous housing assistance.

Those transfers of wealth have helped keep a lid on dissent and shield the UAE from the popular protests roiling much of the Arab world.

Cut-rate gasolene is just one of those perks, making it cheap to fill up the Porsches, Ferraris and hulking Toyota Land Cruisers that race down Emirati highways.