Purported plan for fuel price ceiling draws mixed reactions

AMMAN — The government's reported intention to introduce a price ceiling policy into the pricing strategy of fuel derivatives has generated a range of opinions among experts. 

The government regulates fuel prices through the Ministry of Energy and Mineral Resources and the Energy and Minerals Regulatory Commission (EMRC) 

Under the existing system, the Ministry of Energy and Mineral Resources determines fixed prices for fuel derivatives on a monthly basis, using a predefined pricing formula. Experts said that by October 2023, the ministry intends to modify the pricing formula and introduce a price ceiling strategy. 

“This strategic shift aims to bring about positive changes in the fuel distribution sector, leading to a reduction in unemployment rates and improved competitiveness among the country's main fuel distributors,” fuel expert Hashem Aqel told The Jordan Times. 

Energy Expert Amer Shobaki believes that this shift will address the hardships faced by citizens and fuel distributors in Jordan. 

“The primary issue lies with the high taxes imposed on fuel derivatives, rather than the fixed pricing strategy itself,” Shobaki told The Jordan Times. 

Those who oppose the introduction of a price ceiling policy argue that the key challenge in the fuel distribution industry stems from the high taxes imposed on fuel derivatives, Shobaki said. 

Reducing the tax burden should be the primary focus, as it directly affects distributors’ ability to compete in the market and consumers’ buying power. Shobaki noted that fuel distributors’ profit margin is limited to approximately five fils for each litre. 

Distributors in Jordan have faced escalating operational costs, fluctuating global oil prices and stringent environmental regulations, making it increasingly difficult for them to remain viable businesses, said Shobaki. 

“Without comprehensive tax reforms, the proposed pricing strategy change will not effectively alleviate citizens and distributors’ hardships,” he noted. 

However, Aqel stated that the introduction of a price ceiling will provide a “much-needed” space for market dynamics to flourish, creating an environment conducive to business growth and innovation.

Currently, the fixed pricing strategy, decided upon by the ministry, limits the scope for market forces to operate freely among distributors, said Aqel.

“By replacing this system with a price ceiling, distributors will have more flexibility in setting prices within a prescribed range, which will enhance competition and lead to lower fuel prices and improved services for consumers,” Aqel added.