Raad Mahmoud Al-Tal

At the time of writing this article, crude oil prices are stabilising at elevated levels close to $107 per barrel, driven by rapidly escalating tensions in an already volatile region. With continued escalation and the possibility of further deterioration, prices are likely to rise even more. This increase is not merely a development in global markets; it represents an economic challenge that affects public finances, inflation, and growth. More importantly, it directly impacts the daily lives of citizens.

Although the government has not fully passed on the nearly 65% increase in global oil prices to local fuel prices and has continued to fix the prices of household gas and kerosene the persistence of these pressures since the beginning of the conflict requires a mix of policy tools. These must combine short-term measures with medium- and long-term structural reforms. This places the government’s economic team under a real test in managing the supply shock caused by these rapid developments.

In the short term, policies with immediate impact become essential. Among the most important is adopting flexible and temporary tax policies, such as reducing or suspending part of the taxes on fuel derivatives, while linking this to a clear time frame or an automatic mechanism that restores balance when prices decline. The objective is to absorb the shock without creating a permanent fiscal imbalance. In addition, targeted support should be considered instead of broad subsidies, by providing direct assistance to the most affected groups, particularly low-income households and workers in sensitive sectors such as transportation.

At the same time, the efficiency of the domestic market plays a critical role in determining how global prices are transmitted locally. Improving pricing mechanisms, enhancing transparency, and reducing distribution costs can help prevent excessive inflation in domestic prices. The issue is not always the global price itself, but sometimes how it is passed through to the local market.

However, addressing rising oil prices cannot remain confined to temporary solutions. In the medium term, there is a pressing need to restructure energy consumption by investing in energy efficiency in households and industry. This can significantly reduce demand and limit the impact of price volatility on the economy. Similarly, developing public transportation is a key component of the solution, as it reduces reliance on fuel and eases the burden on households, even though it requires time and sustained investment.

In this context, diversifying energy sources becomes strategically important. Heavy reliance on imported oil exposes the economy to external shocks, while expanding renewable energy sources such as solar and wind provides greater stability and independence. Despite the high initial costs, this transition remains an unavoidable long-term option. Governments can also benefit from risk management tools such as diversifying import contracts and building strategic reserves to mitigate price volatility.

Dealing with rising oil prices requires a comprehensive vision that combines rapid response with structural reform. Temporary measures may ease the immediate pain, but they do not address the root causes. The real solution lies in building an economy that is less dependent on oil and more resilient to global market fluctuations.

The most important reality remains that the impact of this crisis is not confined to budget figures; it directly affects citizens’ pockets. The gap between income and the cost of living continues to widen as higher prices are passed on to the domestic market. While the government seeks to balance fiscal pressures with economic stability, the citizen remains the most affected party. This makes the real challenge one of protecting purchasing power without undermining fiscal stability before these pressures evolve into a deeper economic and social burden.