By Fahed Fanek

The cost of imported energy, in the form of crude oil, other petroleum derivatives and electricity, rose during the first six months of this year by JD751.5 million compared to the same period of last year. Thus, the increase in world energy prices for the whole year is expected to cost Jordan over JD1.5 billion more than last year.

The imported energy bill for 2011 will top $4.8 billion, equal to 20 per cent of the expected gross domestic product for this year, one of the highest rates, if not the highest, worldwide, indicating that there is something wrong and must change.

Jordan’s total imports of all tangible goods during the first half of the year reached JD6,363 million, an increase of 20.8 per cent above the same period of last year.

If the high cost of imported energy is excluded, the value of total imports will drop to only JD5,612 million. In that case, the growth of imports will be no more than 6.6 per cent, against a total exports growth rate of 16.1 per cent, quite a healthy development.

In other words, if both energy consumption and its cost were stable, the deficit in the balance of trade would have narrowed by JD48 million during the first six months of this year. Had this scenario materialised, it would have been cause for celebration.

This measures the sensitivity of the Jordanian economy to external developments, known to be high.

Jordan imports 95 per cent of its energy needs. Its skyrocketing cost forms a big financial burden on the country.

It hurts not only the balance of trade and, consequently, the current account of the balance of payments, but also the central government’s budget, which, for some reason, undertook to maintain the local prices of fuel derivatives unchanged and bear the price difference despite the deficit in the budget and the rising public debt.

Because fuel consumed by industry is not subsidised, the higher cost of energy increased the cost of production and caused inflation, currently running at around 5 per cent, to rise.

This is the picture in dollars and cents that describes the energy problem, which is posing one of the major challenges facing the country.

The questions are: What should be done about it? Are all available means already exhausted, especially tough measures to reduce energy consumption? Is the pricing policy being used to curb too much energy consumption? What about the search for alternative means to generate energy, like wind, sun and oil shale, all in early stages of operation.

Finally, as a last resort, we may have to call on the Gulf states to sell oil to Jordan at preferential prices, especially when Jordan is a candidate for membership in their Gulf Cooperation Council.

The people and the government should admit that the present state of affairs when it comes to energy is not sustainable. The general budget, the balance of trade, the fiscal and monetary stability cannot remain in this situation for long.

The government should be brave enough to inform the public of these bitter facts and ask for cooperation and understanding if some tough decisions must be taken to correct the situation.