Why rising fuel prices have triggered violent protests in Jordan

The kingdom is heavily reliant on crude oil imports from neighbouring countries

A picture of a burning tyre during a strike in Jordan's south. AFP
Beta V.1.0 - Powered by automated translation

Violent protests have erupted in Jordan in response to a surge in fuel prices.

On Saturday, the country’s security forces arrested dozens of people over the protests, in which a senior police officer was shot dead, and resulted in video-sharing platform TikTok being temporarily suspended.

Fuel prices have nearly doubled in Jordan compared with a year earlier, particularly diesel, which is used for lorries and buses, and kerosene used for heating.

The government has reportedly said that it has paid more than 500 million Jordanian dinars ($700 million) to cap fuel price hikes this year and cannot do much more if it wants to avoid breaching an International Monetary Fund deal.

What is driving energy markets — Business Extra

Why did fuel prices go up?

Jordan's fuel pricing committee decided to raise the prices of a number of fuel derivatives this month.

The price of a litre of unleaded 90-octane petroleum increased by 0.01 dinar to 0.920 dinar in December. Meanwhile, the price per litre of unleaded 95-octane petroleum was raised by 0.015 dinar to 1.170 dinar.

Prices of oil derivatives in the local market are calculated based on international prices as well as other costs, such as shipping and taxes.

Brent, the benchmark for two-thirds of the world’s oil, surged to a near 14-year high of $140 a barrel following Russia’s invasion of Ukraine in February.

However, oil prices have lost about 10 per cent of their value over the past four weeks amid concerns of slowing demand.

Jordan’s oil bill increased by nearly 78 per cent in the first six months of this year, compared with the same period in 2021, according to official data, cited by the country’s state news agency Petra.

The value of the oil bill in the January through to the June period hit 1.77 billion Jordanian dinars, compared with 994 million dinars in the same period last year.

How does Jordan meet its energy needs?

Jordan, which has limited natural resources, imports more than 90 per cent of its energy needs and relies on foreign aid and grants to finance its fiscal and current account needs.

The kingdom is trying to overhaul its economy and cut state subsidies amid high public debt and unemployment that is above 20 per cent.

In September, Jordan resumed importing about 10,000 barrels per day of crude oil from Iraq, which sells to the kingdom at a discount rate of $16 per barrel from the average price of Brent crude, the international benchmark.

The 10,000 barrels comprise nearly 7 per cent of Jordanian oil imports of 142,000 bpd. Most of Jordan's crude needs are supplied by lorry from Saudi Arabia.

The Jordan National Energy Strategy aims to reduce the reliance on imported oil fuels in producing electricity.

More than 20 per cent of the electricity grid in Jordan is powered by solar or wind energy, with a target of 31 per cent by 2030.

What’s the state of Jordan’s economy?

In November, Moody's Investors Service affirmed Jordan's sovereign B1 rating and changed the country's outlook to positive from stable, owing to the government pressing forward with structural reforms and the economy's improved growth prospects.

Jordan's economy is set to expand between 3 per cent and 3.5 per cent over 2023 and 2024, according to Moody's.

The IMF expects the economy to grow by 2.7 per cent this year, revised from 2.4 per cent, due to increased tourism and positive regional spillovers from GCC countries.

A stronger-than-expected rebound in tourism receipts and robust exports have been offset by higher food and fuel imports, which is set to lead to a higher current account deficit of 7.8 per cent of gross domestic product for 2022, according to the IMF.

Last month, the IMF and Jordan reached a preliminary staff-level agreement that will boost the total assistance to the kingdom to about $2 billion over the 2020-2024 period.

Updated: December 18, 2022, 10:46 AM
EDITOR'S PICKS
NEWSLETTERS