High subsidies leave oil retailers strapped for cash, forcing some petrol stations in Sharjah and Dubai to turn away customers from locked pumps without explanation.
"Petrol retailers are having to sell a product for less than they acquired it. Ultimately they will have to get a cash injection. It might have something to do with the government in Dubai dragging its feet too much and not injecting enough money," Samuel Ciszuk, IHS Senior Middle East Energy energy analyst told Gulf News.
Analysts believe that Dubai based petrol companies are rationing their fuel to cut costs as a result of high petrol subsidies and a shortage of cash.
"It seems to be a funding problem. It's not entirely uncommon, if you look at some countries in Africa it's a recurring theme when subsidies are in place and companies can't inject money," said Ciszuk.
On the heels of more than a year of periodic petrol shortages at stations, one frustrated driver told an Arabic newspaper he had been searching for two days for an open petrol station in the Al Khan and Tawuun areas of Sharjah but to no avail.
Another motorist told Gulf News yesterday he visited four locked-down stations in Sharjah and Dubai before his Toyota Camry ran out of petrol, forcing him to abandon his car on the roadside, flag down a taxi, fill a jerrycan at an open petrol station, return to his car, finally stumbling into work 90 minutes late.
"I am very upset, the petrol companies really need to sort this out," said the motorist, who estimated the morning petrol pump shutdowns personally cost him more than Dh100 to rectify his ill-fated morning commute.
Station attendants at the Eppco on Shaikh Zayed Road near Dubai Internet City told Gulf News they had no idea why some pumps were closed yesterday morning while tiny red triangles were placed on the tarmac to turn away customers.
Long tailbacks lasted well into the afternoon at the station.
Officials at Enoc and Emarat had not responded.
Last week, Enoc spokesman Khalid Hadi, director of brand and corporate communications, attributed a portion of the closures of Enoc and Eppco stations to equipment upgrading.
"Enoc is managing its fuel supplies to meet the current demand. This involves a two-pronged approach of regulating the distribution of fuel through our network, as well as upgrading selected stations," the firm said on May 26 in a statement provided to Gulf News.
"Enoc is working with concerned authorities to further enhance the supplies. Simultaneously, we are accelerating the upgrade process.
Oil retailers such as the Abu Dhabi National Oil Company (Adnoc), Emirates National Oil Company (Enoc), the Emirates Petroluem Products Company (Eppco) and Emarat bear subsidies on sales which are set by the government.
As a result, local petrol suppliers have been operating at a loss because they buy their products at international prices and are forced to sell at government regulated prices below market value.
Gasoline sells for less than 50 cents per litre in the UAE while in line with rising international prices market prices in the Middle East and Asia have topped 80 cents per litre according to Platts, a global provider of energy and metal information.
Crisis causing rise
The UAE has seen two rises of Dh1.50 per litre in retail fuel prices in the last two years. However, at the same time, international oil prices have also continued to rise mostly due to the crisis in Libya.
"Retailers are going to push for higher prices, but it's a sensitive time and the government will try to resist it," Kate Dourian, Middle East editor at Platts told Gulf News.
In January this year, ENOC asked for the government to lift control over petrol prices as the organisation's retail unit continued to suffer from financial losses of hundreds of millions of dollars over the past five years.
Khalid Hadi, ENOC's brand and marketing manager said that prices need to be at about $40 (Dh147) to $45 a barrel to break even on gasoline sales.
As a result of these losses, retailers are finding it increasingly difficult to pay suppliers.
"There are now even court cases involving some of these suppliers who have not paid their bills. It's similar to what's happening in Sharjah with SEWA not paying it's suppliers," said Dourian.
According to Platts, Emarat has previously been involved in payment disputes on gasoline and diesel supply contracts with various trading companies and a bank.
The UAE government announced plans earlier this year to gradually reduce subsidies on petrol, which would cost the government hundreds of millions of dirhams a year, until prices match international market levels.
However, following the recent uprisings in the region, this reduction in subsidies will see a delay in the implementation of the plans.
"There was talk last year of cutting the subsidies even further however following the Arab Spring, it's off the agenda for the foreseeable future.
"We see subsidies going up in most parts of the Middle East not just on petrol but on food as well," said Ciszuk.