Iraqis say fuel price surge adds to economic woes

The government has increased fuel prices by up to 30 per cent to alleviate pressure on strained budget

Iraqis crowd a Baghdad petrol station to refuel amid a dispute between the authorities and owners of private stations, on April 14, 2022. AFP

Iraqis woke up on Wednesday to a tough economic reality as an increase in fuel prices came into effect.

In late March, the Iraqi cabinet approved plans to increase the cost of fuel by up to 30 per cent, arguing the move is necessary to alleviate pressure on the country’s strained budget.

It hiked the price of premium petrol (95 octane) from 650 Iraqi dinars per litre ($0.50) to 850 Iraqi dinars ($0.65) per litre.

Super petrol (98 octane) is now sold at 1,250 Iraqi dinars per litre, an increase from 1,000 Iraqi dinars. Regular petrol (low octane) will remain at 450 Iraqi dinars.

The decision has triggered widespread anger among Iraqis already grappling with economic challenges.

“This is outrageous and hurts too much,” taxi driver Mohammed Eidan told The National as he left one of Baghdad’s petrol stations.

Mr Eidan, 46, used to fill up his South Korean Kia Carens with premium patrol to allow him to use air-conditioning for customers, especially during summer.

But from now onwards, he has to mix both premium and regular.

He arrived at the station with the 45-litre gas tank half full. He bought 11 litres of regular petrol for 5,000 dinars, he said.

“This will definitely affect the engine as it will not work efficiently during summer and my income will decrease as I will not be able to turn on AC all the day,” the father of five said, wiping from his forehead.

Iraq, Opec’s second-biggest oil producer after Saudi Arabia, has offered fuel subsidies that contribute to the budget deficit. The country’s debilitated refining sector has forced the government to import petroleum products to meet the local demand.

According to Global Petrol Prices, Iraq ranked 14 in the list of the world's cheapest petrol prices in March, while Iran has the cheapest price of $0.029 per litre. The latest hike in prices has meant it dropped to 19 in that list.

In the past, the government has hiked prices to cut the government subsidy bill, freeing up investment for building more refineries, but each move to reduce fuel subsidies causes public backlash.

Since last 2022, Iraqis have been grappling with economic challenges, including skyrocketing goods prices mainly due to the war in Ukraine and the volatility of the Iraqi dinar against the US dollar.

“They are fighting against the citizen,” said Abbas Salim, a 40-year-old crane driver, as he fills his 2023 Hyundai Elantra with regular petrol.

“This is wrong, they are adding more burdens on the people who are already suffering from high goods prices in the markets and other financial commitments,” Mr Salim added.

“Now I have to fill the regular one which is not good for modern cars and that will increase the car breakdowns.”

Iraq’s oil products import bill stands at $4.5 billion per year, the General Director of the state-run Oil Products Distributing Company, Hussein Talib, said recently.

With new refineries coming online, the company plans to end the import by next year, Mr Talib added.

Iraq’s last year budget stood at 198.91 trillion dinars ($153 billion) and ran with a deficit of 64.36 trillion dinars. This year’s budget has bot been approved yet.

In recent years, several other countries have lifted fuel subsides as part of economic reforms.

The UAE liberalised fuel prices in 2015 to allow them to move in line with the market. In 2020, prices were frozen after the start of the Covid-19 pandemic, with the controls lifted in March 2021.

The UAE fuel price committee announced on Tuesday that the prices of petrol in the country will increase next month while diesel is set to be cheaper. Prices rose in February, March and April after dropping in November, December and January, reflecting the trends in the global oil market.

“We can’t compare ourselves with other countries,” Baghdad resident Hanaa Ahmed Essam, 52, said.

“In other countries, there are good public services, special government-run programmes to support the citizens and most importantly their economies are better than us,” Ms Essam added.

“If the reform is a necessary to ease pressures on the budget as the government says it can address the endemic corruption that has led to losing billion of dollars every year, the high salaries of the government officials and lawmakers as wrong policies of hiring more people in public sector,” she said.

"Whenever they feel strain they turn to our pockets."