The average price of gasoline around the world is USD0.98 per litre (Dh.3.6 per litre). But, there is considerable difference in these prices from one country to another. The countries that produce and export oil have considerably lower prices. The United States is a notable exception here, as it has comparatively low gas prices, despite being a non-oil dependent economy. The differences in prices across countries are due to various taxes and subsidies for gasoline.
Although all countries access the same petroleum prices of international markets, the taxes imposed by them differ. Therefore, the retail price of gasoline is different from one country to another. In some cases, in countries like Venezuela, the government even subsidizes gasoline and therefore people pay hardly anything here.
Gasoline is fairly cheap in Dubai, and those who can afford to purchase a car here, can obtain a driver’s license may do well here due to gasoline prices. The UAE has lowest petrol price in the world, owing to government subsidy.
The price of 1 litre of gasoline in UAE at present is Dh.1.70 on an average (with minimum of Dh.1.62).
The average is based on 15 price points. This can be considered reliable and accurate. This is four times less than petrol prices in the UK and about half of prices in the US. This is the reason that owning a car is also less expensive and advantageous in Dubai. Hence, there are more luxury cars in Dubai streets as they are more affordable here than in western nations.
Domestic prices of petroleum products (Ministry of Energy) (2015-16)
||Retail prices (Dhs/Litre)
|Unleaded Gasoline 98
|Unleaded Gasoline 95
|Gasoline E Plus 91
|Diesel / Gas Oil
Petrol prices are capped across Dubai, but, diesel prices are not. The UAE petrol retail market is dominated by national companies like Abu Dhabi National Oil Company (Adnoc), Eppco, Emarat and Enoc.
The usage and pricing of gasoline in UAE is dependent on various factors like processing and distribution costs, crude oil prices, local demand, strength of local currencies, availability of local sources of gasoline and local taxation.
The average price of diesel around the world is Dh.3.72 per litre. But, there is again considerable difference in prices among countries, depending on the availability of oil, as oil exporting nations have significantly lower prices. The differences in prices across countries are due to their taxing and subsidies for diesel.
The price of 1 litre of diesel in Dubai at present is Dh.1.85 per litre.
Factors contributing to pricing gap of gasoline and diesel
According to data from 161 countries, gasoline is more expensive than diesel fuel in 84 percent of all nations. On an average, diesel is 9.85 percent cheaper, but, the differences vary across countries over time. Some of the factors that have contributed to the price growth are:
Both gasoline and diesel fuel are obtained from crude oil, and hence the cost of crude oil is important in determining the prices of petrol or diesel. But, fuel prices are also affected by refining costs, taxation, distribution, and marketing costs. Further, retail prices are affected by market demand. These factors too lead to price gap between diesel and gasoline.
- During the process of refining, the crude oil is separated into various components and they are converted for further treatments into gasoline, diesel and other petroleum products. Diesel fuel is heavier and less volatile than gasoline, and hence it is easier to refine it from crude oil. Therefore, diesel is cheaper than gasoline in most countries. But, introduction of Ultra-Low Sulphur Diesel (ULSD) during 2006 to 2010, increased cost of diesel production as ULSD needs more refining.
- Several countries tax diesel and gasoline differently. For instance, in the USA, the federal excise tax on gasoline is 18.4 cents per gallon and for diesel fuel it is 24.4 cents per gallon. On the contrary, most European countries tax diesel more lightly than gasoline. As taxes impact the final consumer prices of fuels, the tax policy plays a major role in determining the cross-country differences in gasoline and diesel pricing.
- Further, the gasoline and diesel fuel pricing also varies based on demand, as during periods of economic expansion, the industrial sector energy demand grows considerably and diesel prices increase more than gasoline prices. If the demand for diesel fuel is more, there will be a wide price gap.
- The fuel oil used for home heating is also made from same basic components as diesel fuel. Hence, diesel prices are also affected by heating oil demand. In winter, the demand for heating oil is more, and hence, there is an increase noticed in diesel retail prices.
Compressed Natural Gas (CNG)
Compressed Natural Gas (CNG) is an alternative fuel for cars in the UAE. It is a unique, pipe-less, cost-effective and environment-friendly natural gas for transportation, and this solution is now being implemented across UAE.
This is aimed at reducing carbon emissions and in cutting down cost of fuel. The government vehicles will have to first switch over to CNG, followed by private cars. This serves as an environment-friendly alternative to petrol or diesel. In a short span of time, the driving institutes are already relying on CNG to reduce environmental pollution. The Emirates Driving Institute is also now switching over their vehicles to gas-powered vehicles, as a step to make the environment clean.
Apart from keeping environment clean, CNG also reduces frequency of vehicle maintenance requirements, and extends the lifespan of the engine.