Jordan announced on Monday it planned no increases in domestic gasoline prices in 2000 despite higher global oil prices.
But Prime Minister Ali Abul Ragheb was quoted in local newspapers as saying next year's price outlook depended on the terms of an annual supply accord with Iraq, to be finalised later this year.
“There will be no price increases this year but international oil prices have risen higher substantially and this subject depends on prices we will be getting from our Iraqi brothers,” he said.
“(The price rise issue) will crystallise at the end of the year when the Jordanian-Iraqi oil accord will be renewed,” he added.
Raising domestic prices of gasoline is a highly sensitive issue in a country that has seen an erosion in the living standards of a majority of Jordanians over the last decade. A steep price hike in 1988 after a severe economic crisis sparked the country's worst civil unrest.
Baghdad, Jordan's main energy supplier, is delivering 4.8 million tonnes of crude oil and products in 2000 worth over $650 million under concessionary terms that ease the burden on Jordan's deficit-ridden budget.
The agreement — under which Iraq supplies oil at a maximum $19 per barrel — applies a pricing formula that effectively grants nearly half the quantity free of charge.
The long-standing accord is the only exemption to the UN embargo imposed on Iraq 10 years ago.
Prompted mainly by fears that Iraq might discontinue the arrangement or at best eliminate the terms that have made the oil deal lucrative, the government has recently sought to improve ties with Iraq.
The sharp price in international oil prices has added to the strains on Jordan's 2000 budget deficit target of seven per cent of GDP before grants and 2.2 percent of GDP after grants.
Officials say the government is planning to devise a mechanism by year-end that will help reduce the vulnerability of the budget to oil price fluctuations.
By Abul Ragheb
© 2000 Mena Report (www.menareport.com)
