My days and thoughts....

Blog covering some selected happenings in my life.

Friday, July 21, 2006

Fuel Prices in Egypt increases 30%

I don't know why do I always post the bad news in here. Effective this morning, Firday July 21st, price of the 90 Octane gasoline will increase from 1 LE to 1.30 LE /litre ($0.85 US/gallon), the first increase in 15 years. Diesel increased from 0.60 to 0.70/litre, the second increase in 1 year. Nothing was mention about the 92 Octane and the 95.Not to mention that inflation was about 7% last fiscal year, it is expected to edge up much higher this year. However, this increase is justified. It is wise decision that is taken very late. Let's first praise the government for the advantages of this decision.

One of Egypt's refineries has suffered an accident is not working now. Egypt is importing a big portion of its engine fuels. World oil prices are at historical record highs, and are continuing to increase. Fuel is already heavily subsidized in Egypt. Egypt is one of the 10 least priced fuel countries in the world. Check this link to a CNN table. I saw a more comprehensive one where another african country and Iraq had lower prices. This is putting a lot of pressure on the government balance of payments and foreign trade balance. This is a good step to alleviate a possible government bankruptcy decession, yet this may increase a possibility for a recession.


What is wrong is how the decision is announced. Should this government have respected its people it would have announced about the increase, officialy, before it by a good long period. The government has spread rumours before among people about the increase with denial reports about the anticipated increase, psychologicaly preparing the people. The government doesn't trust the people, fearing possible riots(like the ones that happened in January 1977) and the people don't trust the government. This is a drawback non-democratic rule.

In my opinion, I think fuel prices should rise to much much more than that. To anticipate a $100/barrel and given that Egypt imports fuel, within 5 years should be between 3-5 LE. On the short term people will suffer a lot. On the long term this should be better. Bare in mind that Egypt's exports of oil has declined from 0.6 million barrels in mid 1990s to less than 100'000 barrels nowadays. Egypt's production of oil was almost 1 million barrels back then and now its around 500'000 barrels. If the right people were in the right place, most of our problems wouldn't have been there.

Here is an adjusted google translation of the article in Ahram Newspaper

As of today it was decided to move the sale price of litre of Octane 90 fuel
sold to the consumer to 130 piasters. There is also an increasein the price of one litre ofdiesel to 75 piastres. No change has happened tothe price of octane 80 fuel in order to preserve the low-income and compensation for the difference in price of bakery-diesel ensuring price stability of bread. It is noteworthy
that the percentage of the price of fuel in the transportation process, as
confirmed by the studies will not surpass 5% of the total cost of transportation, and it does not justify any tendency to raise the prices of transportation. These actions in the light of the recent period that witnessed an unprecedented increase in the price of crude oil world and a a marked increase in domestic consumption of petroleum products. Fuel has not seen price movement for a long period of time spanning almost 15 years. This increased significantly the burden on the state budget support teams to meet the real cost of production price for the sale price.

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