Petrol in Oman

Last week there was a front-page story on the Oman Observer that proclaimed that the Government of Oman's fuel subsidies have reached RO 1.3bn (here's a link to the re-published story on Zawya, the OO website's search function could use a little work, I couldn't find it).

That's a lot of cash to spend on subsidies in any country, but for Oman with about 2.9 million people, that's effectively RO 448 per person in the Sultanate per year (assuming 1,300,000,000 divided by population of 2,900,000).

Assuming the average driver fills their tank once a week, and spends RO 7 per time (assumptions based on the RO 13 per fill monster land cruisers and the RO 4 per fill Hyundai Cappuccinos averaged out). That's, for the purposes of this blog post,  58 litres per driver (not person, which is where the RO 448 is from - kids and such don't drive!) per week. So that's 3,016 litres a year (on average) and currently at RO 0.120 (for super) per litre (we'll ignore the RO 0.121 for those outside Muscat) that's a yearly fuel bill of RO 361.920, IE, less than what Oman is paying out for you, your partner and your kids on an annual basis.

I'm sure the actual gap between what Oman is shelling out for it's drivers and what drivers are actually paying at the pump is even greater, this was just a metric to really explain the costs. My point is, the price of RO 0.120 per litre for Super has been set here in Oman for years, and according to local Omani Twitterati, @Muscati the last price jump was from RO 0.118 per litre to RO 0.120 when Oman switched to Unleaded fuel way back in 2001.

With the rolling out of the synchronized work weeks and statutory holidays, and the increased minimum wage, I wonder when we'll see a jump in the prices at the pump, and just how much of a jump we'll see. I guess it's not even beyond the possibility of freeing the market and letting the domestic fuel companies compete with each other.

We all pay RO 0.120 at the pumps, but I figure the real cost is somewhere closer to RO 0.270 per litre (based on actual cost of fuel - what you pay + the RO 448 subsidy, divided by average annual consumption of 3,016 litres). So when we do see the inevitable increase at the pumps, social tensions aside, what do you think we'll see?

RO 0.150?
RO 0.175?
RO 0.200?
RO 0.225?
RO 0.250?
RO 0.275?

I've no idea at all, but my guess is, RO 0.200 a litre. Whatever it is, you can be sure there is going to be a lot of angry people. Perhaps it's time to rethink the V8 6l pick up truck as a sensible option when you know your commute is more than 20km a day? And of course is the knock-on effect on inflation here, the cost of commodities will increase because it'll cost more to deliver goods.

One obvious point to note is that the subsidy is for Fuels and Cooking gasses, so the real cost of fuel at the pumps is probably lower, but probably not by too much.

What do you think?

le fin.