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Edition: U.S. Article Comments (0) Full Focus Editor's choice A selection of our top photos from the past 24 hours. Full Article Follow Reuters Facebook Twitter RSS YouTube Read Spelling mansion sold to Formula One heiress: report 1:25am EDT Data shows troubling mix of weakness, inflation 10:17am EDT Greeks strike and clash with police over austerity | 11:21am EDT Greeks rage on austerity, aid deal seen delayed 11:20am EDT Wall Street drops on Greece fears, data 9:59am EDT Discussed 129 Alabama governor signs nation’s toughest immigration law 111 Obama weighs new steps to boost jobs 71 Obama holds off challengers despite economy Watched Airbus' view of flying in the future Mon, Jun 13 2011 Obama resigns from church Mon, Jun 2 2008 Bernanke's debt crisis warning 3:25am EDT In search of fuel in oil-rich UAE Tweet Share this Email Print Related News Brent falls on global economy worries, stronger dollar 11:26am EDT Oil rises on lift from U.S., China data Tue, Jun 14 2011 Consumers spend less, recovery seen on horizon Tue, Jun 14 2011 UPDATE 4-Dubai to launch bond soon, tap market for $5 bln more Sun, Jun 12 2011 Brent hits 5-week high on supply fears after OPEC Thu, Jun 9 2011 Analysis & Opinion Where oil prices will be in June 2012? The jobs crisis Related Topics World » A view of the Burj Khalifa tower in downtown Dubai, May 10, 2011. Credit: Reuters/Jumana El-Heloueh By Humeyra Pamuk and Nour Merza DUBAI | Wed Jun 15, 2011 9:15am EDT DUBAI (Reuters) - Rashed al-Ali spent two hours hunting for petrol before ditching his car. He then walked to a highway to hail a taxi to try to find any place where he could fill his jerrycan with fuel. His story is part of what has become a typical morning rush hour routine for hundreds of workers in the United Arab Emirates, where petrol stations ran dry last week. "Between searching and getting through the traffic at the stations, sometimes it takes me two and a half hours to get fuel," said Ali, 25, who lives in the UAE's northern region and works in Dubai to the south. "This problem is making people waste time. I have to wake up extra early to fill gas at a petrol station before I can go to work in Dubai." The UAE is the world's third largest oil exporter, now pumping 2.5 million barrels per day, and its petrol consumption is estimated to be around five million liters per day. But it lacks sufficient refining capacity in the face of rapidly growing demand with rising population and has to import nearly 1 million tones of gasoline a year to meet demand from its citizens, most of whom drive a car. The authorities have struggled to explain what has become the third fuel shortage in the past 10 months and is now in its third week. It began in Sharjah before spreading to other northern emirates like Umm al Quwain. They first blamed it on maintenance work. But analysts say the problem lies in government subsidies, which look increasingly unsustainable as soaring oil prices drive up the cost of supplying fuel to customers at a cheaper, fixed price. "It is a problem that has been in existence for several years," a Dubai-based independent analyst said on the condition of anonymity. "This was going to happen at some point. "(It's happening now) because the demand is getting higher and the very sharp run up of oil prices since the start of the year." RETAILERS IN LOSS Gasoline is heavily subsidized in the UAE, like other Gulf states, with the federal government setting the price cap. Fuel retailers import their needs from the international market where oil hit a high of $127 a barrel earlier in the year. Three of the UAE's four fuel retailers -- Dubai-owned Emirates National Oil Co (ENOC), Emirates Petroleum Products Co (EPPCO) and federally-owned Emarat -- have been making losses for years. The fourth is Abu Dhabi National Oil Co (ADNOC). "In general the government is not routinely covering these losses," the analyst said. "So it's not really a subsidy because the government is not providing a payment at a regular time. "If anything, the company is providing the subsidy and then making a loss." ENOC said in May it would have to meet an additional 2.7 billion dirhams ($735.3 million) in 2011 to cover the cost of providing subsidized fuel. Last year, it paid out 1.5 billion dirhams. But the government help does not appear to be enough. Dubai, which is slowly recovering from a 2009 debt crisis, spent nearly 5.4 billion dirhams on various subsidies including energy, and other transfers last year, government data showed. In contrast, Abu Dhabi planned to spend 20.2 billion dirhams on subsidies and transfers last year. The emirate, whose fuel retailer Adnoc has faced no interruptions, has an annual budget six times larger than that of Dubai. Emarat, the federally-owned retailer, said in January it was being restructured to try to return to profit. The UAE's Federal National Council passed a bill to allow Emarat to borrow up to 50 percent of its capital earlier this year. "At the end of the day Emarat belongs to the federal government and the federal government stands behind Emarat," an Emarat source said. "Otherwise, the company cannot survive." "SOMEONE WILL WRITE A CHEQUE" Like other oil-rich Arab exporters such as Saudi Arabia, the UAE is a net importer of gasoline. "In some cases, like the UAE, it is a question of using incremental crude to cover for their gasoline shortage," one Gulf-based trader said. UAE's Ruwais refinery, located west of oil-rich Abu Dhabi, is the country's largest, with its 415,000 barrels per day capacity and is operated by Adnoc's refining arm Takreer, which has another refinery with some 90,000 bpd capacity. ENOC's Jebel Ali refinery with just over 100,000 bpd and Vitol's Fujairah refinery with 80,000 bpd are other UAE refineries. Takreer plans to more than double its capacity by the end of 2013, but demand is growing faster, leaving the OPEC member reliant on gasoline imports for now. The government has raised gasoline prices by 26 percent since April 2010 to try to phase out gasoline subsidies. But that plan is unlikely to proceed after popular unrest struck the Arab world. "Given the Arab Spring, this is no time for price hikes," a Gulf-based energy analyst. "It's politically very difficult at the moment." But as vexing as higher fuel prices would be, the population is likely to be more angered by the total lack of fuel, he said. "I'm sure there will be a short term solution with somebody, Abu Dhabi more likely, writing a check." (Additional reporting by Martin Dokoupil; Editing by Elizabeth Piper) World Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story directly or with relevant tangential information. We try to block comments that use offensive language, all capital letters or appear to be spam, and we review comments frequently to ensure they meet our standards. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. Comments (0) Be the first to comment on reuters.com. Add yours using the box above. 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