Fuel crisis and subsidies in Jordan as winter nears

Published October 2nd, 2012 - 08:52 GMT
As winter nears in Jordan, fears are raised over the Kingdoms fuel and energy needs
As winter nears in Jordan, fears are raised over the Kingdoms fuel and energy needs

Officials say the government is reassessing its energy policies in light of expectations that fuel subsidies will reach JD1 billion by the end of the year.

According to Minister of Energy and Mineral Resources Alaa Batayneh, Amman is set to spend a combined JD2 billion in electricity and fuel subsidies in 2012, forcing officials to reconsider its ongoing support of fuel prices.

“This is placing a tremendous burden on the Treasury and is one of, if not, the main cause of our budgetary problems,” Batayneh said at a press conference on Sunday.

Officials point to ongoing declines in the country’s Egyptian gas reserves, which have dropped to 40 million cubic feet (mcf) per day — some 16 per cent of the country’s electricity generation needs and well short of the 300mcf outlined in the gas agreement, as one of the main drivers behind rising energy costs.

Batayneh stressed that even with the supply of 15,000 barrels of oil per day from Iraq at prices $18 less than international rates, 80 per cent of Jordan’s energy needs rest on international prices.

“Outside of limited Egyptian gas supplies and Iraqi oil, Jordan is not receiving any energy supplies at favourable prices,” Batayneh pointed out.

“We are subject to international market prices and this has proven costly.”

Despite a recent fuel price hike, the ministry states that the country continues to subsidise 35 per cent of diesel, 15 per cent of octane-90 and 50 per cent of gas cylinder prices — subsidies that are projected to cost the Treasury an additional JD200 million per year.

With the development of local energy sources such as oil shale five years away, a ministry source said the government is exploring several proposals to reduce fuel subsidies ahead of the winter season.

According to the source, the Cabinet is considering raising gas cylinder rates from JD6.5 to JD7 and a 5 per cent increase in 90-octane prices in order to rein in a national energy bill they say is “bankrupting” the country.

“Unless a miracle energy deal comes through soon, we will be seeing higher fuel prices this year,” said the source, who requested anonymity.

Another potential austerity measure under review is the lifting of kerosene subsidies in favour of programmes to encourage citizens to switch to long-term energy solutions such as solar heating and energy efficient building insulation.

Outside of a recently announced JD1.5 million fund to support loans for citizens in the governorates to purchase solar water heaters, concerned authorities have yet to embark on previously promised large-scale programmes to support Jordanians’ switch to renewables — viewed as one of the keys to the country’s energy independence.

Jordan currently imports 96 per cent of its energy needs at a cost of nearly 25 per cent of the gross domestic product.

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