Will fuel prices in Oman top 200 baisas in 2017?

Energy Saturday 31/December/2016 21:30 PM
By: Times News Service
Will fuel prices in Oman top 200 baisas in 2017?

MUSCAT: It is “logical” that fuel prices will top 200 baisa a litre in 2017 - but we shouldn’t be tempted to re-introduce subsidies, experts say.
Loai B Bataineh, general manager and head of the investment banking group at Oman Arab Bank, said that, logically, prices would cross 200 baisas per litre in 2017 but, at the same time, this does not mean that subsidies should be brought back.
“Winter demand and global deals are pushing up crude prices. It is expected to reach $60 per barrel soon. So, logically, Oman fuel prices will also cross 200 baisas,” Bataineh said.
“However, it doesn’t mean that subsidies should be brought back. Oman’s economy needs a better crude price to recover, so we should not bring back the subsidy soon,” Bataineh said, adding that people have learnt to ration their fuel consumption, and if subsidies were reintroduced it would be the wrong step. According to the International Monetary Fund, Oman’s breakeven price for oil should be $75 per barrel.
On January 15, 2016, when removing the government fuel subsidy in Oman, the price of super unleaded petrol was increased from 120 baisas to 160 baisas per litre; regular reached 140 baisas per litre from 114 baisas, and diesel rose to 160 baisas per litre, from 146 baisas.
Now, one year later, new fuel prices are hovering around 200 baisas per litre. The new price for M91 is 176 baisas per litre, and for M95 is 186 baisas per litre. The new diesel price is 195 per litre.
“I feel that the government should continue with the current practice on fuel prices until Oman’s economy recovers,” said Samra Al Harthy, economist at the State General Reserve Fund, speaking to Times of Oman.
“Removal of subsidies should have been done long ago, in good times. I feel that it’s a good thing to let market forces determine prices, rather than being determined by the government,” Al Harthy said, adding that even if global oil prices hits $65 per barrel, Oman will remain below its breakeven price. Recently, Times of Oman reported that people are opting for car sharing to save fuel expenses.
Almost one year after the fuel subsidies were removed in Oman, motorists have become sensible in filling their tanks, as they have to spend some 45 per cent more, compared to what they paid prior to January 15.
Ahmed bin Saif Al Barwani, a Majlis Al Shura member, said that whether the government will freeze prices cannot be predicted.
“The government needs money. Fuel prices are decided by a panel set up by the government. They review and revise prices according to market conditions. If they see that it hurts the common man, they may freeze it. But it cannot be predicted now,” the Shura member added.
On Friday, Oman crude was traded at $54.41 per barrel on the Dubai Mercantile Exchange.
Meanwhile, motorists said that fuel prices touching 200 baisas are expected soon.
“It will happen in the first quarter itself. It is going to affect us badly. It is going to shoot inflation up, too,” Sunil Kumar KK, a Muscat-based businessman, said.
Latest inflation figures from the government reveal that transport prices jumped 10.2 per cent from a year earlier, after Oman raised domestic petrol and diesel prices.
Following the global oil price dip starting in mid-2014, Oman’s budget deficit for the first eight months of 2015 rose to OMR2.68 billion, eventually forcing the country to remove its fuel subsidies. According to the latest government data, Oman’s budget deficit for the first 10 months of 2016 surged by 46.7 per cent to OMR4.81 billion.
This is against a projected deficit of OMR3.3 billion for the entire year, and a deficit of OMR3.26 billion for the January-October period of 2015. Oman has increased its production of regular petrol by 224 per cent during the first 11 months of 2016, raising output to 6.178 million barrels, compared with figures for the same period last year (1.9 million bbl).
However, production of M95 super petrol suffered a decline of 25 per cent during, with output settling at 15.99 million barrels.
Further, data reveals that domestic sales of regular petrol jumped 240 per cent to 5.18 million barrels, even as super petrol sales dipped by 24 per cent to 16.32 million barrels.