Increase in Oil Derivatives Prices Despite Official Denial

Despite the government's denial of removing the state subsidies, oil derivatives traders have increased prices by half, paying no attention to the official warnings.

Anticipating a likely rise in oil derivatives prices, businessmen hastened to store big quantities of them hoping to sell them at higher prices later. According to a number of businessmen, the government took the decision to increase the price of oil derivatives by the end of last month.

Such a move is also prompted by the low state subsidies allocated in 2008 budget and discussed parliament recently. Compared to 2007 budget, the government reduced the subsidies 25 percent with YR 309 billion instead of YR 418 billion in 2007.

Parliament, which approved the 2008 budget, will be unable to reject any resolution aiming to raise oil derivatives prices, especially when its approval is considered to be a green light for such a decision.

Observers stress that 2008 will be the worst year in Yemen's history once the government resort to removing the state subsidies from oil derivatives particularly under the current low income of citizens, and a recent price hike mounting to nearly 50 percent.

The World Bank assured the deterioration of the economic situation of Yemeni families is caused mainly by the rise of oil derivatives prices which passively affect all life aspects.

Opposition parties, in return, warned against taking such a decision by government and demanded prices to remain at their current level. Economists see that the government should work to prevent any rise in oil derivatives prices as citizens already have had enough over the last two years, particularly when the prices of basic commodities have recently reached record level. A sack of wheat flour today is sold forYR 6,000.

Yemeni government justifies the increase as a process the whole world is going through; however, the world increase does not exceed 2 percent while it is 20 to 30 percent in Yemen.

Meanwhile, the government increased household gas with 25 percent and 50 percent for gas-operated cars, claiming that gas is being smuggled abroad. This increase took place following a gas crisis where a gas cylinder was sold against YR 1,600.

Meanwhile, the government sought the help of Saudi Arabia that announced it will provide the country with 30,000 ton of gas to cover up for the increasing needs though the country has huge reserves of natural gas estimated at 11 trillion cubic foot of which 10 trillion cubic foot will be exported.