With Global Oil Derivative Prices Rising.. Will Jordan Continue the "Gradual" Policy?

Amman, Jordan - The Jordanian government is facing a challenge in continuing its gradual policy of raising local fuel prices, amid the ongoing rise in global prices. The government has not reflected the full global increase on consumers since April until now, and has only raised some fuel prices in phases before stabilizing some of them in recent months, while the price differences borne by the government have reached about 224 million dinars (about 316 million dollars) by the end of August.

The local fuel pricing committee will announce the new prices for October on Wednesday, amid expectations that the cumulative cost will reach about 260 million dinars (about 367 million dollars) by the end of this month, with a likelihood of a limited increase in the prices of some fuel products, ranging between 3-5%. According to data from the Ministry of Energy and Mineral Resources, the government has borne cumulative price differences of about 170 million dinars (about 240 million dollars) by the end of May, before rising to 198 million dinars (about 279 million dollars) by the end of June, then 212 million dinars (about 299 million dollars) by the end of July, reaching 224 million dinars (about 316 million dollars) by the end of August.

The cumulative cost includes, according to that data, the subsidies and price differences borne by the government, including the support for household gas cylinders. For his part, energy expert Hashem Aqel stated that oil and its derivatives have witnessed sharp global increases recently, due to risk premiums and rising insurance and shipping fees, which added costs to fuel prices.

Aqel explained to Afaq News in Arabic that the Jordanian government's policy since the beginning of the crisis in the region with the outbreak of the war on Iran in March has relied on a gradual increase in prices, aimed at avoiding the reflection of large increases all at once on the purchasing power of citizens, transportation costs, and commodity prices, noting that Jordan relies on the port of Aqaba to import about 85% of consumer goods, making rising transportation costs a significant factor in commodity prices. Aqel said that this policy represents "a kind of balanced policy between raising prices slightly while the state treasury bears the difference," until global prices decline and prices are recalculated according to the pricing equation, allowing the government to recover part of the support costs.

He added that freezing prices or delaying the reflection of actual increases is a "fever for the citizen," but at the same time, it may lead to the accumulation of support costs and increased pressure on the public budget, according to Aql, pointing out that the options available to the government in the future "may include increasing taxes, resorting to borrowing, or raising prices." In this context, Aql referred to the global implications of the crisis, indicating that oil prices have become dependent on political statements, military tensions, and wars, moving away from the real market fundamentals such as supply and demand, Chinese demand, and American inventory, in addition to OPEC decisions and reports from OPEC and the International Energy Agency.

He pointed out what he estimates to be sharp increases in diesel prices in the United States, which reached 94%, with prices exceeding $6.35 per gallon, describing this as a "record number that has never occurred in the history of the United States." Aql stated that this prompted U.S. President Donald Trump to propose imposing restrictions on diesel exports abroad, considering that this measure may calm prices temporarily in the United States, but it may later lead to a reduction in refinery production by about 15%, which would decrease the supply of gasoline, jet fuel, and diesel, and bring prices back up, while the price of diesel in importing European countries may rise significantly.

October forecasts Since the beginning of the reflection of global increases on local prices in April, the government has followed a gradual policy in raising prices, the most notable of which was raising the price of Octane 95 gasoline from 1050 to 1200 fils per liter in April, while the price of Octane 90 rose to 1000 fils and diesel (solar) to 850 fils in June, before stabilizing the main prices at these levels during the following months. According to unofficial personal estimates by Aql, "local oil derivative prices may rise between 3 and 5% in the October pricing scheduled to be announced on Wednesday," indicating the "possibility of increasing the price of Octane 90 gasoline by about 30 fils per liter, diesel by about 30 fils, and Octane 95 by about 50 to 60 fils."

Aql explained that Jordan's daily consumption is about 250,000 liters of Octane 95 gasoline, compared to 4 million liters of Octane 90, and about 5 million liters of diesel. Aql estimated in his remarks to the site that the cumulative cost borne by the government could reach about 250-260 million dinars, considering that the continued bearing of this cost puts pressure on public spending and government projects in the future.

Aql confirmed that "there is no risk of supply disruption for Jordan," noting that there is a strategic stock of oil derivatives sufficient for about 50 to 70 days, in addition to a stock of crude oil amounting to about two million barrels. He pointed out that these stocks allow Jordan to continue meeting local demand without the need for measures such as fuel rationing or imposing movement restrictions, and that the main challenge lies in rising prices, not in the availability of supplies, which is a global issue.

Local energy sources The Royal Court announced on Tuesday that King Abdullah II chaired a meeting at Al-Husseiniya Palace to follow up on the government's work in the gas sector and plans to develop it in support of energy security, including the development of the Risha gas field. In this context, Aql stated that the rise in global energy prices should serve as a greater incentive to expand local energy sources, including electric vehicles, solar energy, and wind energy, in addition to developing the Risha gas field.

He indicated that work on developing the Risha gas field is ongoing, expecting production to reach about 420 million cubic feet by 2029, a level he said could achieve self-sufficiency in gas with a surplus. He emphasized the importance of expanding the conversion of vehicles and trucks to operate on natural gas, noting that using gas could achieve operational cost savings of up to about 50% compared to gasoline or diesel.

He pointed out that Jordan possesses diverse sources and capabilities in the energy sector, including oil shale, solar energy, and wind energy, in addition to the liquefied natural gas reception terminal in Aqaba and the Arab Gas Pipeline, along with electricity interconnection projects with neighboring countries, which helps make Jordan a regional energy hub. Regarding the Iraqi oil pipeline project (Basra - Aqaba), Aql noted that consultations are currently underway to activate the project, explaining that its idea dates back to the early 1980s and was reintroduced in 2016, but its implementation was delayed due to the exceptional political circumstances the region has experienced.

He explained that "Iraq today is forced to resort to this pipeline because its oil exports are almost paralyzed due to the crisis in the region, as Iraq relies on 95% of its budget and financial revenues on oil, which puts it in front of a huge financial crisis." He added that "the existing pipeline from Kirkuk to the Turkish port of Ceyhan has limited capacity, and its maximum capacity does not exceed 350,000 barrels per day, while Iraq has the capacity to export 3.5 million barrels per day," pointing out that the implementation of the Basra-Aqaba pipeline project "will constitute a good financial source for Iraq and spare it some of the crises it suffers from."