OIL LINKED TO GLOBAL PRICES
Vinod Nair and Samuel Kutty
Dec. 30: Ending months of speculation on the budget, the Council of Ministers yesterday announced major policy decisions to make up for the loss in revenues. Signalling an end to the era of fixed and cheap prices for fuel, the government decided to decontrol prices of petroleum products from January 15.
A statement released said, “The meeting reviewed a number of procedures to address the impact of the decline in oil prices, aimed at guaranteeing the sustainability of the State’s financial positions. The procedures include cutting down spending in the State Budget 2016, developing non-oil revenues by increasing rates of taxes on the profits of companies, revising and increasing fees payable against some government services and revising the prices of petroleum products in line with the international prices for oil.”
The Council of Ministers instructed the Public Authority for Consumer Protection (PACP) to intensify monitoring of petrol prices to avoid any unjustifiable increase.
The Ministry of Oil and Gas said that a committee comprising of under-secretaries from the Ministries of Oil and Gas, Commerce and Industry and Finance and the CEO of Oman Refineries and Petroleum Industries Company (Orpic) will approve the new prices 48 hours before they are implemented by the oil marketing companies.
Initially, the new policy to link oil prices will come into effect from January 15, 2016, and thereafter it will be monitored and revised at the beginning of every month.
As reports of the possible new fuel prices were circulated on the social media, the under-secretary for oil and gas tweeted that no figures have been circulated on the issue.
Mussallam al Mandhari, CEO, Oman Society for Petroleum Products (Opal), said, “The decision has come at the right time as global oil prices are very low now. The decision was expected and there will be some impact on inflation as fuel prices may not be same.” He said the Government of Oman has been always measured when it came to taking decisions and that is why it is easy to convince people.
Hilal Yahya al Mawali, a top level official of Shell Development Oman, said that he is keen to know more details. “In my personal opinion, this decision was expected keeping in the mind the reforms initiated in other Gulf countries.
It is not proper to speculate on what will happen next but things cannot be same always.”
Opinions from the citizens and expatriates were mixed with some even wondering whether it will affect air fares due to increase in the rates of aviation fuel. “The local travel will be more expensive for lowly-paid expatriates who depend on taxis and it will affect the economy hard from top to bottom,” said Syed Ahmed in his Facebook post.
Redha Juma Mohammed Ali al Saleh, vice-chairman for administration and finance affairs, OCCI, said, “The chamber has already issued a statement on this issue to the media.” Joice Mathew, senior analyst at United Securities, “The move will definitely help government reduce its subsidy burden. But a periodical review of the prices is expected and this will keep a check on the price spiral. The government will not allow any kind of unjustified rise”.
But some sectors of the economy, including service providers like transport will be affected, he said.
“Oman is the only country in the region which has been maintaining low level of inflation. A rise in commodity prices due to petrol subsidy removal may ignite inflation”, he said.
Sultan Soud, managing director of a transport and logistics firm, said the impact will be clearer once more details are revealed.
The bottom lines will include the extent to which the government in turn cuts back subsidies for those companies, which will be affected, he said. “But I think everyone recognises that in this oil price environment, the government and the people cannot go on as they were”, he added.
Yakoob bin Mohammed al Ansari, a banker, said that government’s plan to reduce spending is a welcome move.
“The lower spending decision is good news, showing that the government is rightly concerned about slippage. If the government executes its prudence, it should help in keeping deficits under control.”
About the move on petroleum subsidies he said, “In my view it will be a very gradual and cautious approach.”
Steps to check inflation
MUSCAT: The Public Authority for Consumer Protection (PACP) has said that it will continue to intensify its efforts to control prices, so that there will be no increase affecting various sectors.
Dr Said bin Khamis al Kaabi, Chairman of PACP, said that the Royal Decree No 53/2011 determines the PACP’s tasks and duties, which include price control. He added that the authority operates under the laws and regulations which do not permit raising of prices without prior approval of the authority, which came into force since 2011. Therefore, prices have been stable since that date, and any increase resorted to by a trader without prior approval, if proved, will be penalised and legal action will be taken.
Dr Al Kaabi said that all suppliers and importers should not exploit the decision approved by the Council of Ministers in dealing with the requirements of the current stage and the status of global oil prices to raise the prices of commodities and services without prior approval. — ONA