Yemen government to end oil import monopoly

The Yemeni government has moved to break the monopoly on the import of oil derivatives in order to supply power plants and meet the needs of the people.

Breaking this monopoly is expected to improve living conditions and stabilise the price of commodities.

This was one of the goals of the power-sharing agreement brokered in Riyadh last month between the Yemeni government and the Southern Transitional Council (STC).

The overarching goal is to calm the situation to allow for the unification of efforts to confront both the Iran-backed Houthis (Ansarallah) and extremist groups such as al-Qaeda, who have exploited the power vacuum to launch attacks.

In a December 1st meeting chaired by Prime Minister Moeen Abdulmalik, the Yemeni government approved the formation of committees comprising representatives of the electricity and finance ministries and the oil company.

These committees have been tasked with overseeing the tenders and giving all traders an equal opportunity to import oil and oil derivatives.

This move is being undertaken to end the manipulation of fuel prices and put a stop to recurrent fuel crises and shortages that are causing suffering to the civilian population.

Putting a stop to power outages

Aden residents have faced extended power outage hours due to the shortage of diesel, the fuel used in power plants.

"Power blackouts to homes and neighbourhoods used not to exceed two hours a day. Now they are three or four hours a day or more, at peak times in some neighbourhoods," Aden resident Zahra Muhammed told Al-Mashareq.

"Power blackouts disrupt the daily lives of residents and small business owners, who suffer heavy losses as a result," Muhammed said.

During its meeting, the cabinet reviewed a number of oil purchase bids and also looked at alternative means to secure fuel for power plants.

It sought to reduce the severity of power service interruptions, supply fuel to gas stations to be sold at reasonable prices, and prevent the occurrence of supply bottlenecks.

The government has made it a priority to improve services and normalise the situation, but this will require an integrated effort to achieve, Abdulmalik said.

Aden and other provinces under government control reached a crisis point several times this year, in March and in late July, when the price of a 20-litre canister reached 20,000 riyals ($80).

This was a sharp increase over the pre-crisis official price of 6,000 riyals ($24), and has compounded the suffering of the Yemeni people, who have seen food prices and transportation costs skyrocket as a consequence.

Meanwhile, the sale of oil derivatives has flourished on the black market, and long lines have formed at all points of sale.

Putting an end to the crises

Studies and Economic Media Centre chairman Mustafa Nasr told Al-Mashareq that for this move to succeed there must be a clear and transparent mechanism for awarding tenders in place that is based on clear and transparent rules.

Nasr stressed the need to break the monopoly "in order to put an end to the recurrent oil derivatives crises that have compounded the burdens on citizens amid the war circumstances and driven up the price of food and services".

Political analyst Faisal Ahmed told Al-Mashareq that breaking the monopoly will improve living conditions and stabilise the price of commodities, pursuant to the goals of the Riyadh agreement.

The implementation of the Riyadh agreement backs the state's efforts to combat extremist groups, confront the Houthis and reclaim state institutions, he said.

"Breaking the monopoly will open the way for the largest number of traders to import oil and oil derivatives," economist Abdel Aziz Thabet told Al-Mashareq.

This will create "a competitive environment that will drive prices down by making abundant supplies available", to the benefit of the Yemeni people, he said.

"What is most important is that the import process proceed in accordance with the mechanism developed by the Supreme Economic Committee with regard to the provision of hard currency for import operations," Thabet said.

This stipulates that the Central Bank in Aden will provide hard currency for imports, he said.

He stressed the importance of having the Central Bank undertake this task to spare traders from having to scrounge for hard currency on the black market.