Fuel Prices and Politics

Many Jordanians are celebrating the government’s decision to freeze current fuel prices for the remainder of this year. In explaining the decision, which led to the resignation of the Finance Minister in protest, the government clearly favored public sentiments over sound economic numbers. If not this year, the government will surely revisit fuel prices next year.

Energy is a hot issue globally in today’s mobile societies. Securing cost-effective and stable energy sources is an enormous challenge for non-oil producing nations, including Jordan. The situation in Jordan may be even more critical due to limited availability of alternative energy sources and a historic dependence of its socio-economic system on fossil fuels.

According to the latest statistics I was able to locate for the year 2000, the transportation sector accounts for about 40% of the total energy consumption in Jordan (source: World Resource Institute). Most official statistics place the number of vehicles operating in the country at more than 700,000. According to Jordan Traffic Institute’s statistics for 2004, passenger vehicles account for about 65% of the total vehicles registered in Jordan. Applying this percentage to the current estimate of 700,000 registered vehicles yields roughly 450,000 passenger vehicles. Further, the majority of these passenger vehicles are privately held (vs. the ones used for public transport such as taxis).

I could not locate concrete information on fuel consumption characteristics of motor vehicles operating in Jordan. However, small to midsize cars seem to dominate the fleet, with a growing number of gas guzzling sport utility vehicles (SUVs). So let’s use an ambitious average motor vehicle fuel economy rate of around 200 KM/20 liters (or 0.1 liter per KM). Every time these vehicles travel for one kilometer, they consume roughly 45,000 liters of gasoline, not counting trucks, buses, and other heavy equipment. If every motor vehicle traveled only 20 km on an average day, we are talking about 900,000 liters of fuel or well over JD 400,000 per day!

What does this mean?

First, Jordan must put in place policies that effectively curb fuel consumption while investing in alternative and renewable energy sources (such as wind and solar energies which are quite abundant in the country).

Second, the transportation sector, which consumes a significant portion of fossil fuels, must be tackled through a series of strategies, including but not limited to:

• Developing fuel consumption standards to greatly penalize fuel inefficient vehicles


• Providing incentives to individuals and businesses to encourage the use of hybrid vehicles (electric, electric/gasoline combination). A Hybrid Honda Civic for example yields 63% more fuel economy over its gasoline-based counterpart. Not to mention, a hybrid vehicle produces much less pollutants and noise than a gasoline-based vehicle.


• Improving public transportation in order to provide a viable alternative to driving to an increasing segment of Jordanians (especially in Amman)


• Developing and implementing land use and development policies which promote walking and public transport compared to the ugly urban sprawl plaguing Amman

Third, the government needs to address the impacts of rising transportation costs on the economy. Producers, service providers, and workers are negatively impacted by transportation costs to the point it can hinder Jordan’s economic competitiveness. Therefore, targeted subsidies combined with consumption reduction policies will still be needed to ensure Jordanian businesses and individuals have reasonable access to mobility.

Work has already begun on some of these steps.

For example, according to information on the Customs Department web page, hybrid vehicles receive a 26% discount in taxes. I wonder how many people are aware of this discount. This incentive clearly demonstrates that even when a tax incentive reduces government revenues it also reduces its expenditures in the form of fuel subsidies. The Greater Amman Municipality is amidst a major master planning project which promises to curb urban sprawl and bring back the old livable city.

However, what seems to be missing is a comprehensive national strategy that coordinates the sometimes conflicting work of several ministries, departments, and agencies. What is also missing are strategies to engage the public because public buy-in is critical for the success of any government policy.

It is hard to change old habits, but Jordan needs to act now before it is too late. By making a few sacrifices now, Jordanians can avoid making even more major concessions in the future and could ensure a better future for the whole country.