OPEC announced on Nov 27th, the long awaited meeting, that it will keep their production unchanged at 30 mbpd, signaling to the other major oil producers that it will no longer risk losing market share to keep the prices in check.
Needless to say, a country like Jordan, which imports 97% of its energy needs will gain the most out of the lower oil prices, here are direct benefits:
- Lower Budget Deficit: The Jordanian budget has been facing a huge deficit in the latest years for a number of reasons; first, the flood of Syrian Refugees since 2011, estimated to cost the country 1.8% and 2.4% of the GDP in 2013 and 2014 respectively. Also contributing to the deficit, the cut of the Egyptian Gas supplies and the Iraqi Subsidized Oil. Jordan managed to trim the deficit from 9.3% of GDP in 2013 to an expected 8.3% this year. Today, Jordan Finance Minister Umayya Toukan expected the deficit to go down to only 2.5% in 2015, thanks to the lower oil prices.
- Lower Trade Deficit: The trade deficit rose 8.6% in 2013 and a further 10.5% in H1 2014, this is mainly due to higher energy bill, which increased 16% in the first 8months of 2014, and increase commodity imports due to the increased population of Syrian refugees. Lower Crude Oil price will bring down the value of imports, at least until Jordan will become less independent on importing crude oil and derivatives in H2 2015, when a number of Renewable Energy projects will come online, and the LNG terminal in Aqaba begins operation.
- Lower Inflation: Jordan removed fuel subsidies in 2013, since then, lower oil prices will reflect on the local market and consumer prices, lower fuel prices cause dis-inflation, already, the EU is worrying about deflation with the recent news of OPEC meeting, but the EU have very low, and unhealthy, inflation rate of 0.4%, while the rate in Jordan was 5.6% in 2013.
- NEPCO back to profitability: The Jordan National Electric Power Company losses are expected to rise in 2014 to JD1.45 Billion ($2.1 billion), of the the targets of the IMF program is bring bring NEPCO back to profitability by 2017 by gradually raising electricity tariffs, the first increase was in the beginning of 2014. With the planned increase in 2015 combined with lower electricity generation costs, NEPCO might go back to profitability earlier.
- Remove Subsidies: Jordan removed fuel subsidies in 2013 and replaced it with cash payments for lower income households. As a result of the sustained lower crude prices below $100, Jordan cancelled the scheduled 3rd payment of fuel compensations for 2014, which will save the treasury JD70 million ($100 million) in 2014, further, in 2015, will save $300 million.