Jordan is under no threat of interruptions in fuel supply — energy experts

(Photo: Ameer Khalifeh/Jordan News)
AMMAN — As oil prices continue to skyrocket worldwide, reaching a 10-year high this week amid US and EU sanctions on Moscow that have shaken energy sectors in the Middle East, Jordan News spoke to economists and energy experts about the effect of the Russia-Ukraine crisis on Jordan, as higher oil prices would mean higher prices for essential goods during dire economic conditions. اضافة اعلان

Economist and expert in oil and energy affairs Amer Al-Showbaki said that the world’s present fuel and energy issue is either related to supply or to prices, ruling out that Jordan would face a shortage of fuel derivatives unlike countries that solely rely on Russia for its oil imports.

“Ten percent of Jordan’s needs are met by Iraq, with the balance coming from Saudi Arabia and the Gulf states, thus, it is unlikely that we will face a shortage of oil derivatives in the near future,” said Showbaki.

Showbaki questioned the government’s ability to deal with an increase in oil prices if the price of a barrel rises above $150 as the rest of the world predicts that if Europe and the US impose sanctions on Russian oil exports, the price of a barrel of oil could easily rise to $150 or even $200.  Showbaki said that the hike could exceed the $200 forecast, alluding to a statement by Russia’s Deputy Prime Minister, who said that if the West decides to impose sanctions on Russian oil exports, oil prices would soar up to $300.

According to Showbaki, Jordan’s potential crisis “would be actually caused by the government itself,” as it has become overly reliant on taxes from oil derivatives, which already account for a third of the government’s tax earnings.  He added that the government’s current options are “to raise local prices and risk popular unrest, or incur additional costs that may not be included in the budget plan, necessitating the creation of an emergency budget to deal with these challenging events.”

Showbaki said that the International Energy Agency recommends having a strategic stockpile of oil derivatives sufficient for 90 days, hence the government took advantage of the low oil prices in 2020 and early 2021 to increase its strategic stockpile, especially since it relies fully on oil imports. Nevertheless, he believes “that there is no reason to be concerned about oil supplies, and that the major issue could only be the high price.”

Hashem Aqel, another economist and energy expert, said that it was initially thought that the Russia-Ukraine crisis would not take long, “but the assumptions proved wrong and prices will continue to climb as long as the war continues.”

He emphasized that Jordanian oil prices are tied to global oil prices, and that if Russian oil is prohibited, Europe’s demand for oil will rise, causing supplies to fall and prices to rise. He ruled out the price of oil reaching $300, saying “that this is an exaggeration” because data shows that Europe would not impose sanctions on Russian oil and gas as 40 percent of Europe’s energy is imported from Russia. This, he believes, “will be in Jordan’s best interests, as well as the best interests of all countries that rely on imported energy.”

Jordan’s strategic stock is under no threat, believes Aqel, as neighboring countries such as Saudi Arabia and Iraq are key energy-producing countries.  “It is unlikely for Jordan to face any interruptions in oil derivatives, but a Jordanian citizen’s nightmare would be a hike in prices.”

Another oil expert, Zuhair Sadiq has a different viewpoint.  He believes that the rise in the price of oil derivatives, “although taking place globally, is not justified.”  He said the import process is under fixed contracts for at least six months, implying that it is too early for prices to start rising in Jordan. “We have become warlords,” he commented.

Sadiq noted that Jordan’s daily needs vary from 300 million to 350 million cubic feet, and that if the Russia-Ukraine war continued, “it will bring a calamity for a country like Jordan.”  Moreover, Sadiq added that the expiration of Jordan’s strategic stockpile in two months “will be a bigger disaster because prices will rise in a way that Jordanians will not be able to afford.”

Minister of Energy and Mineral Resources Saleh Al-Kharabsheh stated on Monday during a weekly media forum, organized by the Centre for the Protection and Freedom of Journalists in collaboration with Zain Company, that Jordan’s strategic stockpile of fuel products is sufficient for 60 days. He acknowledged the local increase in the prices of fuel derivatives, which drove Prime Minister Bisher Al-Khasawneh to direct the relevant authorities to reassess the fixed fuel tax.

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