Tuesday, March 11, 2008

Slick liberalization

Today, I chuckled as I read Samih Ma’aitah’s piece. In it, he earnestly asks questions about how petroleum products are priced, the cost of the crude oil that we buy and the relationship between the two. I don’t know if he is being naïve or being clever.

I have pointed out previously that the numbers that the government feeds us on this issue don’t make sense. It is almost as if the numbers are put out to confuse rather than to explain.

The government has recently liberated the price of oil products, but it has not liberated the oil market. This means that they retain the monopoly on importing and marketing oil, set the price they feel is appropriate and, thus far, don’t allow the private sector share in the bounty. Nobody is suggesting that government control of prices is meant to protect consumers.

When the issue of the expiration of the 50 year contract with the Jordan Petroleum Refining Company showed up a couple of years ago, the initial statements suggested that the market will be opened and competition between different companies will result. Ziad Manaseer opened a chain of high end modern gas stations in anticipation of this. Since then, the contract has expired and the government has dragged its feet on issuing legislation and regulations to allow for real liberalization to occur. I guess 50 years wasn’t enough time to think about this and decide what to do next.

Today, a report in Al Ghad says that a group of industrialists want to set up a company to import and distribute oil products, because obviously feel that they can get a better deal this way than buying the oil from the government. One investor says that he hopes that the government will encourage this step and take the necessary steps to create the proposed company. His statement suggests that he probably realizes that the government is not interested in any competition in the energy market, all the statements supporting a market economy not withstanding.



At 12:08 AM, Anonymous Anonymous said...

I think he was trying to stretch the boundaries of his stratosphere. This was not a naive article at all. The funny thing is that they know that we feel we should not go all the way against them. You and i know that maintaing this brinkmanship with them (them again. I know..)is much safer than us facing each others ways or arms. Can we claim to wish to demonstrate with , or to know, the occupants of cars stuck on any circle.
An old peice of song comes to mind 'He followes the rules and drank his Vodka straight"
Let's leave it at this, shall we?

P.S: Hope you are taking it easy those days

At 8:11 AM, Blogger Abu Daoud said...

Hmm, so is selling gas a main source of income for the government? Does anyone know how much $ is made that way?

Also, do they have special rules for Aqaba? Or is that all controlled by the gov't too?

At 10:12 AM, Blogger Khalaf said...

Anon: Thanks. I am doing fine.

Abu Daoud: The problem is that the gov does not claim to be making money on this, either in Aqaba or anywhere else. But their behavior on this issue is suspicious.

At 3:12 PM, Anonymous Anonymous said...

I would love to see differnt oil companies operate their own gas stations , ala the US, where everyone sets their own prices. This issue of "Monopoly" applies to many other products where one or two big guys have the rights to import and nobody else. Thats one of the reasons behind the high prices.

At 7:56 PM, Anonymous Anonymous said...

How much has the government liberalized the price of oil? It would really help me in finishing the piece I'm writing (www.godotbasha.blogspot.com) on the inflationary effects this would have in Amman. I was not aware that oil prices have been relieved of subsidies. Thanks


At 12:05 PM, Blogger Khalaf said...

Godot: Current prices are as follows: Gasoline (octane 90): 0.585 JD
Gasoline (0ctane 95): 0.665 JD
Diesel and kerosine: 0.600 JD

Source: http://www.alghad.jo/index.php?news=313638

At 2:06 PM, Anonymous Anonymous said...

Thank you


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