By Fahed Fanek

Jordan’s economy is very sensitive to the fluctuations of petroleum prices. During 2010, the imported petroleum bill rose by 31 per cent, to form around 12 per cent of the gross domestic product. It contributed at least 3.7 percentage points to the inflation rate. It also had a negative impact on the economic growth rate, reducing it to only 3 per cent, even when compared to 2009, a year that was marred by economic slowdown and a sort of recession.

The last time domestic prices of petroleum derivatives were revised by the government, world prices of oil were up around 5 per cent, but the government decided to maintain the domestic prices at the existing level for a month more, in view of the circumstances at the time, and the popular protests against unemployment and higher cost of living. During that month, yet another rise of 5 per cent took place in world oil prices, due to the state of uncertainty regarding the possible interruption of oil supplies originating from some Middle East oil-exporting countries, especially Libya.

The above worrying facts indicate that the step taken by the government to reduce tax on certain oil derivatives by 4 percentage points was useless. The continued pressure on oil prices in the world markets all but neutralised this concession in a matter of days.

In such difficult situation, the government is supposed to impose strong restrictions and take harsh measures to conserve energy and reduce petroleum consumption. However, such measures will not be taken at this time because the present mood of the people does not tolerate any such austerity measures.

We live in a time when people extract concessions and gains, not take sacrifices.

Jordan’s limited resources and poor finances do not allow it to adapt to the present hardships if it continues to pay for imported petroleum at the present world commercial prices of crude oil and petroleum derivatives.

In view of the great surpluses of oil exports proceeds, resulting from higher prices, of the oil-exporting Gulf states, it seems only normal for Jordan to expect a preferential treatment in prices, to help maintain political stability, which is vital for these countries’ own security and stability.

At this juncture, one can recall the strategic plan made by the government to deal with the situation after the refinery’s concession expires. Unfortunately, the plan was not implemented. The government of the day found it enough to annual agreements with the refinery, authorising it to continue business as usual, which effectively amounted to extending the concession, instead of putting an end to the refinery’s monopoly and opening up the market to free imports, and giving up the practice of revising the local prices on monthly basis, with all the undesirable consequences.

To state the obvious, the government should recognise the fact that Jordan Petroleum Refinery Company is a private-sector company. Its monopoly on importing, refining and distribution of petroleum products should come to an end, and the government should cease to interfere in the company’s affairs and plans to modernise and expand.