The first transport fuel prices announced under the Government’s new free market regime were greeted warily by UAE businesses, as petrol pump prices were hiked by 24 per cent while diesel was cut by 29 per cent.
The Ministry of Energy’s new fuel price-setting committee yesterday said that all UAE petrol stations would from August 1 drop diesel prices from Dh2.90 a litre, to Dh2.05 a litre, while petrol prices (95 Octane) would increase from Dhs 1.72 a litre to Dhs 2.14 a litre.
Suhail Al Mazrouei, the Minister of Energy, said the objective of the new regime was to have the lowest free market fuel prices for consumers, although regional fuel prices that remain subsidised – Saudi Arabia’s, for example – would still be much lower than those in this country.
That situation was anticipated by the Government, which recently put restrictions on vehicles filling up in Saudi Arabia and crossing into the UAE.
“You will see [prices] lower than any liberated market because there is no tax and we reduced the profitability of the companies downward,” said Mr Al Mazrouei.
“For businesses, we think the impact on diesel is going to be positive. The reduction … should drive [down] the operating and transportation costs for many sectors. Already, we saw a reduction in [some public transport] tariffs.”
He said the aim is for transparent and predictable prices in future by setting the price each month based on international benchmark prices plus a “small profit, which will not change”, for the local distribution companies, including Abu Dhabi National Oil Company (Adnoc) and Emirates National Oil Company (Enoc).
Cutting diesel prices initially was painful for the distribution companies, as the Adnoc Distribution chief executive, Abdulla Al Dhaheri, made clear.
“Given the prevailing global prices, it was a real challenge for Adnoc Distribution to cut down diesel prices,” Mr Dhaheri said. “The decision to reduce diesel prices has been taken in the public interest with the aim of supporting the national economy and ensuring its global competitiveness.”
But some say it is not yet clear that the overall effect of the fuel price change will be lower costs, even for some of the largest diesel users.
“I think it is too early to know how it will affect the total logistics market,” said Mohamad Alkhas, the chief executive for GCC countries for Aramex, one of the biggest parcel delivery outfits in the UAE.
Aramex runs about 100 lorries, 300 cars and 300 motorbikes in its UAE fleet, but they are a mixture of petrol and diesel-based.
“And the impact for the cross-border fleet will be much higher and harder to predict,” Mr Alkhas added.
Indeed, many companies operating on a large scale regionally try to optimise their fuel costs by filling up where possible in the lowest-price subsidised countries. Companies in the UAE may try to source petrol in Saudi Arabia, where the fuel is about US$0.15 a litre, versus $0.46 a litre in this country before the August increase.
Moon Star Freight in Dubai uses about 90 sub-contracted drivers, many of whom have already been hit by the change in rules restricting their ability to fill up in Saudi Arabia, according Clinton John, a senior marketing executive with the company.
“We will have to see two or three months of price changes to gauge what the impact will be,” Mr John said. “Prices of diesel could go back up so we don’t know that we would make any decisions about our fleet until we see how it is going to go over time.”
A lot of companies such as Moon Star Freight are too small to consider hedging prices.
The overall impact on many non-transport companies is not likely to be significant initially.
“Gasoline and diesel are important inputs for our transport operations, but any variations which may occur as a result of the new gasoline and diesel deregulation law by the UAE Government would not likely have a significant impact on production costs,” said Abdallah Massaad, the chief executive of RAK Ceramics. Last year, he said, RAK Ceramics spent Dh24.7 million on petrol and diesel, which is less than 2 per cent of revenues.
Consumer prices will immediately be affected by the petrol price rise but more gradually from diesel prices, if businesses choose to pass on the reductions.The combined fuel price changes should add about 1.3 percentage points to headline consumer price inflation, according to Monica Malik, an economist at Abu Dhabi Commercial Bank. The year-on- year inflation rate to June for the UAE was 4.2 per cent.
amcauley@thenational.ae
Additional reporting by LeAnne Graves and Adam Bouyamourn
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The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
THE BIO
Favourite book: ‘Purpose Driven Life’ by Rick Warren
Favourite travel destination: Switzerland
Hobbies: Travelling and following motivational speeches and speakers
Favourite place in UAE: Dubai Museum
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
THE SPECS
Engine: 6.75-litre twin-turbocharged V12 petrol engine
Power: 420kW
Torque: 780Nm
Transmission: 8-speed automatic
Price: From Dh1,350,000
On sale: Available for preorder now
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
Company profile
Name: Dukkantek
Started: January 2021
Founders: Sanad Yaghi, Ali Al Sayegh and Shadi Joulani
Based: UAE
Number of employees: 140
Sector: B2B Vertical SaaS(software as a service)
Investment: $5.2 million
Funding stage: Seed round
Investors: Global Founders Capital, Colle Capital Partners, Wamda Capital, Plug and Play, Comma Capital, Nowais Capital, Annex Investments and AMK Investment Office
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RESULTS
5pm: Maiden (PA) Dh80,000 1,200m
Winner: Ferdous, Szczepan Mazur (jockey), Ibrahim Al Hadhrami (trainer)
5.30pm: Arabian Triple Crown Round-3 Group 3 (PA) Dh300,000 2,400m
Winner: Basmah, Fabrice Veron, Eric Lemartinel
6pm: UAE Arabian Derby Prestige (PA) Dh150,000 2,200m
Winner: Ihtesham, Szczepan Mazur, Ibrahim Al Hadhrami
6.30pm: Emirates Championship Group 1 (PA) Dh1,000,000 2,200m
Winner: Somoud, Patrick Cosgrave, Ahmed Al Mehairbi
7pm: Abu Dhabi Championship Group 3 (TB) Dh380,000 2,200m
Winner: GM Hopkins, Patrick Cosgrave, Jaber Ramadhan
7.30pm: Wathba Stallions Cup Conditions (PA) Dh70,000 1,600m
Winner: AF Al Bairaq, Tadhg O’Shea, Ernst Oertel
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
SHAITTAN
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