War fuels petroleum black market in Yemen

By Faisal Darem in Sanaa

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A Yemeni man fills up a bottle with gasoline in Sanaa. Due to the ongoing war, citizens are turning to the black market to sell and buy oil derivatives. [Faisal Darem/Al-Shorfa]

Yemen's protracted war has led to a severe shortage in fuel imports and catalysed a thriving black market for oil derivatives.

The black market has become a primary source of oil derivatives and is even providing jobs to many who lost theirs because of the war, officials and economists told Al-Shorfa.

The oil derivatives black market thrived after the Yemen Petroleum Company (YPC) halted its fuel imports in February because of the war and lack of hard currency, they said.

"The government's top priority is to provide hard currency for the import of basic foodstuffs, which the Central Bank succeeded in doing in the past period," Deputy Minister of Industry and Trade Abdullah Abdul Wali Noman told Al-Shorfa.

State institutions, led by the Central Bank, are working to raise the funds necessary to enable the oil company to carry out its duty of importing oil derivatives despite the difficulties created by the war, he added.

The price of derivatives on the black market ranges between 4,000 Yemeni riyals ($16) and 8,000 riyals ($32) per 20 litres, he said, despite falling global oil prices on the open market.

The YPC was providing oil derivatives at a lower price of 2,800 riyals ($11) per 20 litres in February.

War affects imports

The war prevented the YPC from importing oil derivatives, which was in turn unable to get sufficient liquidity from the Central Bank to support its operations, YPC deputy director of public relations Ali al-Haimi told Al-Shorfa.

Allowing traders to import petroleum "created the black market, which now controls the [sale of oil derivatives in the] market", he said.

The black market is capable of covering the need for oil derivatives at prices that are not as high as black market prices last year, which went up as high as 30,000 riyals ($125) per 20 litres, said economist Abdul Jalil Hassan.

Last year's black market prices were much higher because the import of oil derivatives was restricted to the government-run company, Hassan told Al-Shorfa, adding that allowing traders to import petroleum this year "has alleviated much of the burden on both the citizen and the state in light of the war".

Since the YPC stopped importing oil derivatives three months ago, prices remained stable for a while on the black market at 4,000 riyals per 20 litres, he said.

However, the rise in the dollar exchange rate against the riyal and the inability of oil tanker trucks to reach Sanaa due to security conditions have caused prices to rise again, sometimes reaching as high as 7,000 and 8,000 riyals per 20 litres, he added.

Supply and demand

Oil derivative prices fluctuate based on supply and demand on the black market, Hassan said.

"The country is going through difficult and extraordinary circumstances and is expected to face various hardships, particularly in relation to importing from abroad," he said.

"Despite the negative aspects of the black market, it has provided numerous job opportunities after business activity came to a halt when the war began in March 2015," he said.

Construction worker Mohammed Hameed told Al-Shorfa he and his three brothers decided to start selling oil derivatives on the black market after they found themselves out of work for nearly seven months.

"We were willing to take any job as long as it helped us provide daily sustenance for our children," he said.

"We benefited from the experience of some of our friends who worked in oil derivative trading in 2011," he said, adding that he and is brothers get their supply of oil from Thammar province and the city of Radaa in nearby al-Bayda province.

The inability of tanker trucks to deliver oil from al-Wadia border crossing with Saudi Arabia through Marib province has caused prices to soar after they had stabilised at 4,000 riyals for a while, Hameed said.

This sudden rise in prices has however had a positive impact on his trade, he added.

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