Since the outbreak of the Iran-US-Israeli war, global oil and energy markets have experienced a strong shock, driving up crude and derivative prices, and increasing transportation and insurance costs, at a time when pressures on diesel and jet fuel supplies intensified.
However, when looking at the Jordanian situation, the question is not only about the global oil price increase, but also extends to a more important question: How much of this increase was actually reflected on the Jordanian citizen?
The comparison between global and local prices reveals that Jordan did not fully transfer the oil shock to the local market, but rather followed a policy of gradual adjustment of derivative prices, while the treasury bore part of the price differences, aiming to limit the full global increase to the consumer.
Global oil... from $70 to over $100
Before the crisis, Brent crude was trading at levels close to $70 per barrel. With the outbreak of the war, prices rose sharply, exceeding the $100 per barrel barrier, with an average of about $120 in April, before prices later retreated, remaining above pre-war levels.
In September, the International Energy Agency indicated that the price of Brent reached $113.48 per barrel on September 9, with oil prices remaining about 45% higher compared to pre-war levels.
However, the biggest shock appeared in the oil derivatives market, especially diesel, which saw sharp increases due to supply disruptions, reduced derivative exports, and higher transportation and refining costs.
According to the International Energy Agency, the price of diesel in the US market exceeded $263 per barrel at the beginning of September, an increase of about 94% from pre-war levels.
What happened in Jordan?
In March, the price of a liter of octane 90 gasoline was 820 fils, while the price of a liter of diesel was 655 fils.
As the crisis continued and import costs rose, local prices gradually increased, but the increase did not reflect the full rise seen in global markets.
By September, oil derivative prices in Jordan stabilized at:
1000 fils per liter of octane 90 gasoline.
850 fils per liter of diesel.
1310 fils per liter of octane 95 gasoline.
550 fils per liter of kerosene.
Thus, the price of octane 90 gasoline increased by about 22% since the beginning of the crisis, while the price of diesel increased by about 30%.
This shows the gap between the global market and the Jordanian market; while global diesel saw an increase of about 94% in the US market compared to pre-war levels, the local increase in Jordan was about 30%.
The treasury bears part of the shock
The reduction in the global shock's transfer to the Jordanian citizen was not due to a decrease in global oil costs, but rather partly due to the policy of gradual pricing and not reflecting the full increase in global markets on local prices.
According to the Ministry of Energy, the price differences borne by the treasury amounted to about 224 million dinars by the end of August.
This figure reflects the financial cost of the policy of absorbing part of the global shock, as the treasury bore part of the difference, while another percentage of the increase was passed on to the consumer through gradual price adjustments.
Thus, the Jordanian citizen did not bear the full increase seen in global markets at once, while the public finance bore part of the cost of this protection.
Why is diesel particularly important?
The importance of diesel is not limited to the transportation sector, as it directly or indirectly enters the cost of wide sectors of the economy, from trucks and public transport to agriculture, industry, construction, and logistics services.
Therefore, the increase in diesel prices does not stop at the fuel station, but can be transferred to the cost of transporting and producing goods, and thus to the prices of many products and services.
Hence, limiting the increase in diesel prices locally compared to the global increase can help reduce the transmission of the inflation wave to various economic sectors.
A difficult equation between consumer protection and financial sustainability
The energy crisis puts Jordan in front of a delicate equation; dealing with rising prices cannot be based solely on fixing prices entirely, and transferring the full global increase to the consumer immediately imposes additional burdens on citizens and economic sectors.
Between the two options, Jordan has adopted a policy based on gradual price adjustments, distributing the cost of the shock between the consumer and the treasury.
However, continuing to bear price differences for long periods poses a challenge to public finance, especially if global energy prices remain at high levels.
Therefore, the challenge is not only about how to protect the consumer from rising oil prices, but also about how to develop more sustainable tools to deal with future energy shocks, achieving a balance between protecting citizens and maintaining financial stability.
Numbers that summarize the scene
When the numbers are put together, the picture becomes clearer:
Brent: From about $70 to over $100 per barrel.
Octane 90 gasoline in Jordan: From 820 to 1000 fils per liter.
Diesel in Jordan: From 655 to 850 fils per liter.
Price differences borne by the treasury: About 224 million dinars by the end of August.
These numbers show that the global oil shock reached Jordan, but it was not transferred to the consumer at the same level as seen in global markets.
Conversely, absorbing part of the shock through the treasury has a financial cost, making the energy file management face a double challenge: protecting the citizen from fluctuations in global oil prices, while maintaining the sustainability of public finance.
Jordan's experience during the crisis remains an example of trying to distribute the cost of the energy shock instead of passing it on entirely and immediately to the consumer, with
