King of Jordan Halts Fuel Price Increase

Written by Adam Nicky
Tuesday, September 04, 2012

Experts don’t see alternative fuel resources in the near future

AMMAN- King Abdullah II of Jordan has stepped in to stop the government from imposing an increase on gasoline prices, a move apparently aimed at easing growing public discontent over the government’s economic policy.

The king, who wields absolute power in accordance with the constitution, reacted one day after a 10 percent rise in fuel prices had been announced as part of a series of measures intended to trim the budget deficit and generate badly needed funds. The royal decree by the monarch, known for his pro-Western outlook, seemingly did the trick, absorbing at least some of the anger at the government’s fiscal policies visibly spreading among the poor and, according to some observers, even threatening the country’s stability.

When the price increase was announced, the government had explained the move as necessary to mitigate the impact on the budget. Following the cancellation of the fuel price hike, the king did not say what, if any, measures would be taken to compensate the treasury for the loss of funding the gas hike would have provided.

The move by Abdullah on Sunday came only hours after dozens of angry Members of Parliament vilified conservative Prime Minister Fayez Tarawneh for raising fuel prices without consulting legislators. A motion of no confidence calling for Tarawneh’s dismissal was rejected on constitutional grounds.

Upon word of the intended increase in the cost of gas, economists had accused the government of turning a blind eye to the concerns of the country’s industrial sector which feared it would be harmed by a continued increase in production costs. Abdel Razaq Tabour, a member of the Zarqa Chamber of Industry, said the government took the decision without consulting the business sector and expressed concern over the future of laborers in the industrial sector.

“Industries have been suffering for the past years due to limited markets and high competition. With this frequent change in fuel prices, I am not sure how long we can continue,” Tabour told The Media Line. He said thousands of workers could lose their jobs and warned about growing social unrest in poverty stricken areas where unemployment is believed to be more than 15 per cent. Earlier Sunday, the streets of west Amman turned yellow after hundreds of taxi drivers staged a strike in busy parts of the capital to protest against the fuel increase.

“They are robbing us in broad daylight,” shouted one cab taxi driver referring to government reliance on taxation as a response to the shortage of cash. “Tomorrow, the prime minister will be fired after he puts in place the new increase. They are playing musical chairs games with us. One prime minister comes to increase prices, and another replaces him to absorb anger of the public,” said Zaidoun Abul Haq, an activist from the taxi drivers union.

Jordan is one of the poorest countries in the region in terms of oil and energy resources, with most of its needs imported from neighboring countries. Saudi Arabia supplies most of the country’s fuel needs at a comparably lower price – with discounts as large as 20% according to economists -- compared to the international market, while Egypt pumps gas from the Sinai desert.

Officials have been concerned that the cash-strapped kingdom of Jordan remains hostage to its political relationships with its larger neighbors, preventing it from finding energy from local resources while the government is accused of overpricing necessities such as fuel.

But despite the kingdom’s discounted gas prices, experts and economists still accuse the government of overcharging citizens when compared to what other nations pay. A senior official from Royal Jordanian Airlines says the company buys airplane fuel in more than 60 cities around the world, and of those, prices in Jordan rank highest. Speaking to The Media Line on the condition of anonymity, the source said he expects the national flag-carrier will continue to suffer in a highly competitive market. Just recently, the company was forced to shut down some of its operations to Europe and Asia due to its mounting losses.

The kingdom is currently looking into alternatives to conventional fuel for generating electricity, including atomic energy and extracting shale oil extraction. A multi-billion dollar project to build the first nuclear facility is under discussion, but the ambitious program has not yet been approved and under any circumstances is not expected to be functional for many years.

Efforts to tap into vast reserves of shale oil, however, began earlier this year, but experts believe it will produce enough to satisfy the country’s rising demands any time soon.

In the meantime, experts say the government will be struggling to meet the strict conditions of the International Monitory Fund to keep its books balanced as it looks toward borrowing more money in order to solve its urgent financial needs.

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