Jordanians’ economic woes expected to intensify as oil prices soar

(Photo: Envato Elements)
(Photo: Envato Elements)
AMMAN — During its monthly meeting last week, the Ministry of Energy and Mineral Resources’ Petroleum Products Pricing Committee decided that prices of crude oil and other petroleum derivatives are to be raised for the month of August, citing the rise in oil prices globally.اضافة اعلان

A day after the committee’s meeting, Brent Crude and US West Texas Intermediate crude settled at $75.84 and $75.23, respectively, after both metrics climbed by more than $2, reaching their highest since October of 2018.

The recent spike in energy prices forebodes of further economic difficulties for people in Jordan, which is heavily reliant on imports for its energy needs, according to experts.

The increase in prices was immediately reflected across local gas stations. Octane 90 gasoline is up 20 fils and now stands at JD0.81 per liter, whereas octane 95 gasoline is up 30 fils to JD1.04. Diesel and kerosene both increased by 25 fils, amounting to an identical price of JD0.605 per liter.

When more money is put towards energy used for the powering of homes and cars, Jordanians are left with less disposable income, i.e., income to spend in other areas like food and healthcare, and as price hikes simultaneously prevail among other commodities, the burden is bound to intensify for Jordanians, energy-focused journalist Lahab Atallah notes.

According to Reuters, hedge funds and other money managers around the globe are “confident prices will rise further” as coronavirus vaccine deployment intensifies, more businesses open, and travel resumes. Investment bank Goldman Sachs even forecasts that prices will hit $80 per barrel this summer.

In an interview with Jordan News, Atallah accredited the sustained rise in prices to three main factors: OPEC oil supply reduction, the reopening of the economy, and geopolitics.

As of July, supply cuts put in place by the Organization of the Petroleum Exporting Countries and allies – abbreviated OPEC+, stand at 5.8 million barrels per day (bpd). Crude oil price is merely “a matter of supply and demand,” says Atallah. When supply cuts occur, there is an excess in demand. Subsequently, prices go up. This year, oil prices rallied 30 percent.

As part of reopening measures in Jordan, As of July 1st curfew across the Kingdom now commences at 1am rather than at 11pm, while those who carry valid vaccine cards are no longer subject to curfew restrictions, which means that businesses can now stay open an extra two hours, and as tourism picks up due to the expansion of air travel, demand for energy is further increasing.

Meanwhile, alternative sources of energy such as oil shale are already costly to extract. Oil shale deposits are present in over 70 percent of Jordanian territory, amounting to over 30 billion tons. Extracting one barrel of oil shale will cost anywhere from $35 million to $45 million, according to Jordanian energy expert Zuhair Sadeq.

Oil shale’s high cost, which comes despite its abundance, is the result of “the unconventionality of its extraction,” says Sadeq in an interview with Jordan News, which consists of extensive mining and heating.

Like oil shale, renewable energy sources remain inaccessible to most Jordanians. When coupled with economic downturn, rising energy cost is bound to be “faced with consumer resistance,” says Reuters.

This costliness is particularly concerning when considering that “energy is necessary for economic growth, social development and improved quality of life,” as per a Heliyon Journal report dissecting energy consumption in Jordan.

Energy price increases, therefore, inevitably inhibit economic growth and social improvement, according to the report.

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