Gov’t needs to ‘think out of the box’ regarding oil prices

(File photo: Ameer Khalefih/Jordan News)
AMMAN — Prices of crude oil fell more than 5 percent in volatile trading last Tuesday, primarily due to concerns about demand following the International Monetary Fund’s downward revision of its forecast for global economic growth and warning of rising inflation, yet in Jordan some experts forecast a rise in the price of oil derivatives.اضافة اعلان

Amer Shobaki, an economist and specialist in oil and energy affairs, told Jordan News that since the Russian-Ukrainian war, oil prices have been in a state of “extreme fluctuation, according to the shortage or increase in oil supply in relation to global demand”.

He added that as the price of oil is linked to the global economy, if Europe decides to impose new sanctions on Russia or on the Russian oil sector, prices will rise.

According to Hashem Akel, energy and oil expert and analyst, if sanctions were imposed on Russian oil derivatives, there are alternative markets willing to buy large quantities from the Russian market, thus supply and demand will not be affected and “there will be no effect on oil prices”.

He believes that during the current period, oil prices will fluctuate due to instability related to the Russian-Ukrainian war, “but with the beginning of the third quarter of this year, it is certain that there will be a global decline in oil prices”.

“OPEC has a monthly increase estimated at about 400,000 barrels per month, and the epidemiological situation in China led to a decline in Chinese demand for oil, which increased the quantity of supply in relation to demand”.

Economist Yusuf Mansur said to Jordan News: “It is assumed that the prices of oil derivatives in Jordan will decrease along with the decrease in the price of oil globally, but the equation in Jordan is different in this regard and is somewhat unpredictable, as there is a deficit in the state budget, which the government is trying to plug.”

If the government reflects the price drop on production and consumption, it is possible that there will be an economic recovery. If it does not, the economic situation will remain the same, Mansur added.

According to Shobaki, there may be a gradual increase in the prices of oil derivatives in Jordan.

“At the beginning of next month, I expect that there will be a rise in oil derivatives by 4–8 percent,” Akel said, adding that the government maintained the prices of oil derivatives as “a debt owed to the citizen”, but “it will recover it in the coming period”.

He added: “In Jordan, there are two problems: a high oil price and a high oil derivatives tax. So, the government needs to think outside the box and come up with ways to lower the fixed tax on oil derivatives, so that the citizen will have financial savings and thus a purchasing abundance with which to buy other goods, also subject to tax. Thus, there will be no decline in treasury revenues.”

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