Experts doubt gov’t claim of revenue losses from oil price fixes

For the majority of Jordanians the latest hike in fuel prices was already too much for them to bear. (File photo: Ameer Khalifeh/Jordan News)
AMMAN — Interior Minister Mazen Al-Faraya said last week that Jordanians should get ready for the possibility of four more fuel hikes in the coming months. He justified the decision by saying that the government had lost JD450 million in the first quarter of this year by keeping fuel prices fixed while oil prices were increasing internationally.اضافة اعلان

During his meeting with investors at Al-Hassan Industrial City, Faraya said the government “will not be able to continue the policy of fixing fuel prices as it did over the past three months, and that citizens must understand this.”

Faraya’s controversial statements were widely criticized by Jordanians from all walks of life. For the majority of Jordanians the latest hike in fuel prices was already too much for them to bear. Fuel prices had hit a historic level and the effect would be reflected on the prices of basic goods and the cost of living, at a time when Jordanians were still reeling from the effects of almost two years of the COVID-19 pandemic on the economy.  

Oil expert Amer Al-Shobaki told Jordan News that we should expect more than four upcoming fuel price increases, in light of the turbulent international oil and gas markets. He added that the government is trying to make up for lost revenue resulting from keeping prices steady in the first three months of the year.

Shobaki said that there is some ambiguity regarding how much the government actually lost in taxes. “There is more than one figure that was circulated by officials in the past 10 days,” he said. “One is JD173 million according to the secretary-general of the Ministry of Energy, and then there is the JD 300 million pointed out by the assistant secretary-general of the Ministry of Energy, in addition to the JD450 million cited by Minister Faraya,” he added.

Shobaki admitted that the government was actually profiting from oil derivatives sales through taxes.

But economist Mazen Irsheid said that stabilizing oil products prices for a few months did not result in actual losses because the government imposes fixed taxes on oil products that deliver about JD1.2 billion annually to the Treasury. “So it’s not accurate to call them losses but rather unrealized revenue,” he added.

The solution he and other experts are calling for is for the government to leave the energy sector and allow competition between private companies who will import refined oil derivatives, which will relieve the government from handling additional costs.

Such a move also reduces the cost of maintaining the oil refinery, which is borne by the consumer. “The state should impose an appropriate income tax to encourage private companies to enter this sector and set price ceilings for these companies when need be,” Irsheid said.

For his part, Shobaki stressed that these hikes put Jordanians in difficult situations especially those with modest incomes. He said that the real pain will be felt in the coming winter season as a majority of Jordanians depend on fuel oil for heating.

Read more Features
Jordan News