Back to the complete issue
Friday, 4 November 2016

Breaking news: Egypt to cut fuel subsidies, raise price of petrol at the pumps

** BREAKING NEWS: Egypt cuts fuel subsidies, raises price of petrol at the pumps. With subsidy reform a condition of the IMF executive board’s pending approval of a USD 12 bn extended fund facility and oil prices rising substantially over the Ismail government’s budgeted price for 2016-17, Egypt cut fuel subsidies and raised prices at filling stations just after midnight today. The move was first reported late last night by both Al Shorouk and Aswat Masriya.

As of this morning, fuel prices are as follows:

  • 95 octane petrol will now sell for EGP 6.50 per liter, and the price per liter will be allowed to float
  • 92 octane petrol has risen 35% to EGP 3.50 per liter (from EGP 2.60)
  • 80 octane petrol has risen 47% to EGP 2.35 per liter (from EGP 1.60)
  • Diesel has risen 31% to EGP 2.35 per liter (from EGP 1.80)
  • Kerosene will also sell for EGP 2.35 per liter
  • Compressed natural gas for automobiles has risen 31% to EGP 1.60 per cubic meter (from EGP 1.10)
  • Mazot (fuel oil) will now cost between EGP 1,500 and EGP 2,500 per ton

Natural gas prices for home consumers will also rise. All price rises took effect at 12:01am this morning. You can see the Oil Ministry’s official statement here (jpg) as received via email.

The phase-out of fuel subsidies is the right thing to do… The wealthy benefit most from the subsidies. Simply put: Whether you’re driving a gas-guzzling Jeep Grand Cherokee with a 5.7 liter hemi or a gas-sipping compact, you’re consuming more fuel than you would if you were to take public transport.

…It is also likely to prove inflationary and will hit low and low-middle income earners in a manner in which we argue the float may not. We have further thoughts on this at the end of today’s report, but we remind readers that (1) there’s a good argument to make for EGP 15.00 per USD 1.00 being “priced in” right now and (2) there’s an equally good argument to be made that low income earners will be largely shielded from the float provided the government manages the price and availability of subsidized commodities. That said, the last round of fuel price hikes in July 2014 saw transport and food prices (among others) shoot up significantly for lower income earners and the poor.

Keep your eye on the news this morning: Al Masry Al Youm says Prime Minister Sherif Ismail and ministers of the economic group will hold a press conference today at 9:30am to outline the government’s course of action post the float and price hikes. The risk of socioeconomic backlash will be high on their mind, as Central Bank of Egypt governor Tarek Amer suggested at a press conference yesterday afternoon. More on that below.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.