Friday, June 15, 2012

Deciphering the tax on gasoline in Jordan.


Thank God for transparency….. in the US at least.

The US energy information administration publishes its “Gasoline and Diesel Fuel” update on a weekly basis at http://www.eia.gov/petroleum/gasdiesel/

For June 2012, regular Gasoline US national price on June 11 was 3.57 US$ per Gallon, that is 94 cents per liter. The US price is inclusive of an average 11% tax and 8% marketing and distribution.

Without the tax, the price per liter in the US is 85 cents. I.e. 0.595 JODs.
Price in Jordan is .7 Jods.

So we infer that the tax on regular gasoline in Jordan (Octane 90) is .11 JODs, which is 18%.

Premium is usually 10% higher than regular gasoline in the US. Its price in Jordan is 1 JODs per liter (1.41 US$). In the US with 11% tax its price is 1.04 US$. Without tax in the US, its price is 94 cents. Tax in Jordan is therefore around 50% for premium gasoline (1.41 minus .94 US$, which is 47 cents per liter).

With 18% tax on Octane 90 and 50% tax on Octane 95, how does the Minister of Finance speak of a gasoline subsidy? Gasoline is a major earner for the government.

Respect our intelligence please. And then tax as you please!

8 comments:

Firas Khlaifat said...

but hasn't the gov. deliberately taxed the 95 more to absorb lowering the tax on the 90? I'm not agreeing but merely mentioning the rationale behind the variance in tax between the two.

That said, and irrespective of the order on the "extra inflow" list, when is the God forsaken petrol market in Jordan going to be "liberated". At least let their be 3 different service\product providers, let them be agile on finding new channels and means for importing, let them by the bare minimum compete on quality and deliver a 95 when they're selling it as such..

Anonymous said...

provided that oil price is the same in the Middle East and North America

Jawad J. Abbassi said...

Yes the Gasoline is comparable.. Jordan gets it from Saudi Arabia which means much lower transport costs.

Firas, I could not agree more. Liberalization of the sector is a must.

Mahmoud Homsi said...

Just for the sake of common sense , every single article that tackles the issue without knowing the exact mechanism for the oil pricing and the import cost is just a rhetoric and is adding to the back ground noises that makes it hard to focus on the main issue , instead of talking about taxing percentages because its the only part that we are " partly " informed about , how about a seasoned economist such as yourself mr abbasi ask for the official papers , under the " حرية الوصول للمعلومات " law that was passed through the legal channels .

i salute your hard work sir , but arnt you as an economist sick of dealing with theories and assumptions instead of simple numbers ,,,

much respect sir
peace

Anonymous said...

all the conclusions are based on the litter price while the numbers mentioned in the link and used in your article are for gallons ( 1 US gallon = 3.785 litter ) and you are not comparing the raw materials prices but the final product ( regular gasoline and other products ) while Jordan buys raw oil from SA and some other gulf countries ( as a raw martial ) and you should add the cost for transportation and the producing process of the 4 kinds of gasoline and the refineries fee and the disruption's fees and other costs and then add the tax .
am not defending the government , the gasoline's prices are too high in Jordan those days but this article is a misleading article , whoever wrote it is wildly leaks of knowledge about the gasoline pricing mechanism and is talking about something not related to published comparison .

Anonymous said...

am with comment # 5 , the raw materials prices at usa and SA as a rich country in oil for the local use of its 4 kinds of gasoline is not calculated nor based on the international market price which means a big wild deferent in the final's product price .

Anonymous said...

jawad your comment makes me laugh ... dont try to look like an expert .
i will give you a simple example so you can understand the deferent
I own a big land reach of cement and you don’t . both of us are going to produce a final product as cement for buildings purposes.
In this case you have to buy the raw cement from me (the raw material cost + all the related costs + my profit ) then produce the final product , while I can produce my cement without adding any profit and I can minimize the other costs
Now here is the question : guess who's cement will be cheaper !!
Here is a hint : it's not yours for sure .

Jawad J. Abbassi said...

Quick replies to the anonymous comments below:

US prices are for gallons. Prices were converted to liters for comparisons. It is at the start of the article!

US national average rates are inclusive of ALL costs, including transportation and marketing and refining. With the much higher wages in the US these costs are much higher than in Jordan. Especially that Jordan's monopoly refinery does not do ANY marketing. For analysis purposes, marketing and distribution costs were assumed to be the same.

Finally, Jordan imports all of of its refined fuel from the nearby Saudi Arabia, and most of its raw oil from Saudi Arabia. Only 400 Kms distance.