Wednesday, June 15, 2005

Diesel

The Ministry of Oil and Gas insists that the huge hike of almost 50% in the price of diesel was meant to prevent smuggling. Earlier this week the minister of national economy addressed Majlis Al Shura and repeated the same. Furthermore he said that the new price is still lower than international prices.

I was discussing this with some friends who are all in the retail business and they were complaining that there's no way this increase would not be passed on to consumers through a hike in price of all products. I hear that the price of fruits and vegetables immediately increased after the diesel hike. Let's face it, all transport trucks run on diesel. Someone has to pay for the jump, and it won't be the transport companies.

During a dinner conversation a friend asked: how come the fact that diesel was cheap in Oman lead to smuggling across the border but the fact that petrol has always been cheaper in all our neighboring countries never lead to smuggling to this side?

And from today's Times of Oman article about the minister of national economy's Q&A session at Majlis Al Shura:

Shura member Fadhil Al Shikaili: "food stuff and diesel prices have gone up. Will the citizen bear the mistakes of other parties?"

Macki (the minister): "I don't want to talk about diesel."

One final consolation, the minister said that the government will compensate all contractors working on government projects for the price increase.

3 comments:

Devilish said...

I heard the price hike is exaggerated for some products, n they r just using the hike in diesel cost as an excuse.

muscati said...

Devilish that's probably right. There are always unscrupulous traders who take advantage of things like this for their own profit. That's why the ministry of commerce needs to have an effective price monitoring mechanism. The same happened in the UAE when the president increased salaries for all government employees.

However, a 50% hike in diesel would definitely cause an increase in price of some products. It all depends how big a percentage travel and fuel costs are as part of the product cost.

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