by Kevin Stoda
The Week newspaper here in Oman reports, "Earlier this week, for the first time in 30 years, the price of super unleaded petrol rose from" Omani 120 baisas (US$0.31) to 160 baises (US$0.42) per liter, regular from 114 baisas (US$0.27) to 140bz per liter(US$0.33) and diesel, from 146 baisas (US$0.35) to 160 baisas (US$0.42) per liter. This means that residents in Oman are taking on the chin approximately a 25% increase in fuel prices in a single week--and all of the difference is going to their national government.
Meanwhile, American gas prices at the pump have fallen drastically over the past 2 years and in January 2016 (for the first time this decade) American motorists across the country are paying well under 2 dollars a gallon (3.78 liters) per gallon for super or premium and regular fuel. Currently, regular unleaded fuel is in some parts of the USA cheaper than it is now in Oman--a major Middle East Oil producer..
In short, Omanis are witnessing and have been suffering a 25% increase in fuel prices at the pump in a single week. Surprisingly, the "[n]ew fuel prices prompt mostly positive reaction from Omanis and expats alike."
How would Americans respond to any 25% price hike in fuel in 2016? However, first lets review how are the residents of Oman have been responding to this unprecedented increase in cost at the pump?
According to The Week publication, most consumers are accepting the change with a positive attitudes. Mark Dmello, a management accountant with a construction company here indicated, "It is our duty to support the government by paying that little extra on fuel prices because if development slows down, a large number of companies in various industries will be forced to either downsize or shut down completely. People would lose jobs. Recession will set in."
Omanis whom I talked to in October 2015--i.e. just prior to the recent national Omani elections--had indicated already that they were willing to pay more at the pump following the massive drop in oil prices in 2014 and again 2015. This pre-election discussion with Omanis demonstrated to me that there exists here in Oman already a well-founded consensus among Omani nationals, that the country has determined to no longer rely on petroleum. Therefore, citizens were all ready claiming that petroleum prices needed to be hiked in order to better-plan and guide the nation's new developmental future over coming decades.
Omanis biggest worry has not been concerning their personal rise in expenditure at the fuel pump; their biggest fears are that companies around Oman might abuse (i.e. gouge consumers) the auto-fuel consumer's generosity at the pump in 2016. That is, use it as an opportunity to unfairly jack-up prices, ie. by unfairly claiming that fuel costs were pushing the prices up on all their other costs at the same time. In Muscat, for example, it is particularly feared that taxi fares will increase too steeply and unfairly in 2016.
Nonetheless, across the country of Oman it appears that the decision this January 2016 by the government to raise fuel prices is being seen as "a proactive step on the part of the government to increase the fuel prices now before things go out of hand. It is only apt that the country is considering a cut in subsidies. Given the current scenario of falling crude oil prices and considering Oman derives over."
One expat cited in The Week article states, "In Oman, fifty-percent of the country's income from petroleum products. It has therefore 'becomes obvious that the economy of the country will face a major blow, sooner or later. If one is to believe analysts, then crude oil prices are not getting any better in the near future.'" Meanwhile, most everyone else here recognizes that declining oil prices has placed a huge drain on the Omani government.
In the medium and long term, there are fears concerning rise in prices across the board. T he subject of inflation is high on the minds of most people. Ahsan Ali, projects manager at the Ministry of Defence Pension Fund, says, "I think the economy will be affected as a hike in oil prices will cause inflation. The cost of production of all firms will increase so it is likely that the prices of everything, from daily necessities to luxury needs, will increase. This will discourage people from spending which is not good as overall, economic activity in the country will decrease."
One official response to these concerns has been an explicit Omani government statement that the price of cooking gas will remain the same. However, Omanis and expats here ask whether the government will be able to keep a track of the rises on the cost of all goods in the country. One woman interviewed states her opinion, "[T]here will not be an impact on the daily lives of people directly right away" We [all]may in time have to plan our budget to avoid unnecessary expenditure."
Another expat "believes that there will be a tightening of purse strings as the disposable income of consumers goes down. 'Increase in input costs like transportation and power charges can also create inflationary pressure.'"
All in all, however, the overwhelming consensus here in Oman is that raising fuel prices 25 percent is appropriate now and it will help the government and country of Oman to develop more sustain-ably in the future.
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