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Sunday, 25 April 2021

We’re going to pay more at the gas pump for the first time since 2019

The government raised fuel prices by 3-4% over the weekend following a rise in global oil prices during the first quarter, the Oil Ministry said in a statement. The hike — the first since July 2019 — means that motorists will now pay an extra EGP 0.25 per liter for 95, 92 and 80 octane fuel. As of Friday:

  • 95 octane has risen 3% to EGP 8.75 per liter, up from EGP 8.50;
  • 92 octane has risen by 3.3% to EGP 7.75, from EGP 7.50;
  • 80 octane has risen by 4% to EGP 6.50, from EGP 6.25.

Prices of mazut fuel oil for use in factories will remain fixed at EGP 3.9k per tonne, while diesel prices will also stay put at EGP 6.75 per liter, the ministry said.

These rates will remain in effect throughout 2Q2021 and are subject to change when the fuel pricing committee next convenes at the end of June to decide on rates for the third quarter. Fuel prices had remained unchanged over the past year after being lowered in April 2020.

Why the move? The price increase aims to mitigate pressures on the state budget as global oil prices inch up, unnamed sources at the ministry told the local press. The state coffers could face additional costs worth USD 10 bn if global oil prices continue to stand at USD 65 per barrel, which is USD 5 above the USD 61 average price assumed in the state budget.

This comes as the government moves towards a complete elimination of fuel subsidies: Egypt has been gradually phasing out fuel subsidies since 2016 as part of the IMF-backed economic reform program. The collapse in global oil prices last year helped subsidy expenditure to plunge 77% in FY2019-2020 and 45% during 1H FY2020-2021 to EGP 8.4 bn, putting the government on track to beat its EGP 28.2 bn spending target this fiscal year.

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