Increase in oil prices will negatively impact encomic growth

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AMMAN — If the government increases fuel prices in May to reflect international prices, as it announced, inflation rates and people’s purchasing power will be negatively impacted, energy experts say.اضافة اعلان

Despite the international increase in fuel price, due to the Russian-Ukrainian war, the government has kept prices unchanged since February, selling octane 90 at JD0.850 per liter, octane 95 at JD1.085 per liter, and diesel and kerosene at JD0.615 piasters per liter.

Economic analyst, and oil and energy expert Hashem Akel told Jordan News that he expects the fuel price to increase by 7 percent, whereas international fuel prices have increased by around 27 percent.

“If the government were to increases fuel prices in line with international prices, it would be a drastic increase,” that would anger people “because they will not be able to deal with or bear such an increase”, Akel said.

He added that a liter of octane 90 gasoline could reach JD1.6, and of octane 95 JD1.25, whereas diesel will sell for JD0.91 piasters when prices go up.

According to Akel, the government would adopt a gradual approach to increasing fuel prices “so people could accept it and deal with it”. The increase, however, will affect daily needs like food, health, and education.

“It is a very critical issue,” Akel said, adding that a drastic increase in fuel prices will lead to a higher inflation rate, which is the main problem international economies, like the US’, face.

“The US decision to impose sanctions on Russia had imposed unintended sanctions on all other countries, because Russia is like the world’s gas station,” he added.

“Citizens will not be able to handle the increase, but they are forced to do so. So we have to find solutions that can be achieved locally,” Akel said.

He believes the government should consider three solutions: omit the fixed tax on fuel prices, “because decreasing the tax will allow citizens to save some money, which will lead to greater purchasing power”; stop setting fuel price caps to create competition among fuel distributors; cancel all fees on electric cars and encourage their use by increasing the number of charging points in the Kingdom in a way that would use surplus electricity.

Economist and specialist in oil and energy affairs Amer Shobaki told Jordan News that he would urge the government to postpone any rise in the prices of oil derivatives because citizens will be burdened with additional financial obligations during Ramadan and before Eid Al-Fitr.

He said the government should take into consideration the modest economy, inflation, unemployment rates, and citizens’ complaints about the rise in consumer and food prices.

According to Shobaki, “a further increase will reduce people’s purchasing power and negatively affect economic growth, and the government’s revenues from taxes on services and goods, foodstuff, and transportation.”

“This is dangerous and may lead to an economic recession,” Shobaki said, adding that a drastic increase could not be tolerated by citizens’ income, “especially since geopolitical indicators and the fundamentals of the oil market suggest that the gasoline price will remain at more than $100 per barrel until the end of the current year.”

“The government must think a thousand times before gradually raising prices, and thoroughly study the size of taxes on these basic commodities,” Shobaki said.

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