Rabat ‒ Lahcen Daoudi, Morocco’s minister of governance and public affairs, has explained the rationale behind Morocco’s recent price-capping regulations for the energy sector, noting that the move had both economic and geopolitical motivations.
Saving Morocco’s market attractiveness
Speaking at a parliamentary session on Monday, May 6, Daoudi said that he was aware that his decision to cap oil prices was unlikely to be implemented between the February and mid-March of 2019. He added, however, that the move was necessary for public utility.
Reassuring members of parliament that he is doing his job, Daoudi argued that the decision to cap oil pricing was only a “card” he played “to put pressure on oil companies.”
According to Daoudi, the reason the decision was not immediately put into force is that there was a necessity to paint Morocco in a positive light to potential investors. The move aimed to keep “Morocco’s positive image,” Daoudi elaborated, noting that some companies were considering leaving the Moroccan market.
But market attractiveness was not the only reason for the move. Another motive, according to Daoudi, was the geopolitical atmosphere. The Moroccan minister especially cited the current circumstances in Libya and Venezuela, as well as the tense relations with Iran.
Responding to some of the criticisms of his treatment of the issue of price capping, Daoudi noted that the price capping is underway. But he did not provide an exact date for implementation, simply saying that the decision will come into force as soon as possible.
In response to questions on the price increase in vegetables, Daoudi said the government put hotline numbers at the service of citizens to report their complaints in this regard. He noted, however, that the government cannot monitor every street.
Daoudi lamented the profit margin the oil companies enjoy, which is MAD 2 per liter.
Controversy
The decision to cap oil prices came in response to serious concerns and controversy in the Moroccan energy market.
According to MP Omar Balafrej, oil companies in Morocco make “unreasonably and unethically” large amounts of profits off Moroccan consumers. Balafrej estimated companies’ profit margins to be standing at MAD 17 billion.
Despite the price decrease in the global market, Moroccan companies did not reduce their price tags, angering many Moroccans, who boycotted a number of oil companies.
Balafrej argued the “unethical” profits made by oil companies could have been invested in a number of projects, including free transport to all students, a railway connecting al Hoceima and Rachidia, 17 university hospitals, or 1,000 community schools.
But the price-capping policy has not been unanimously welcomed. Driss Guerraoui, the newly-appointed president of the Competition Council, a body tasked to uphold free market rules and transparency, considers the decision to be both impractical and illegal.
For Guerraoui, price-capping is an encroachment on Article 4 of the Law on Freedom of Price and Competition. He said a move to impose pricing directives on companies will yield no positive results for the Moroccan market as a whole.
Under the law, Guerraoui argued, the administration may “take temporary measures against excessive price increases or decreases caused by exceptional, catastrophic or manifestly unusual market conditions in a sector after consulting the Competition Council.”
