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Egypt Raises Fuel Prices 78% Overnight

Tyler Durden's picture




 

Egypt's surging budget deficit has hit its limit and the Oil Ministry has decided to cut its $20bn plus fuel subsidies. The result - mainstream fuel prices by up to 78% from midnight on Friday. As Reuters reports, previous governments have failed to curb energy product subsidies, fearing backlash from a public used to cheap fuel. We will wait and see the response but as one analyst noted "It should be noted that the effect of a rise in fuel prices will not affect the poor directly, since they do not own cars..." which makes perfect sense as long as the poor do not use or purchase any item that has fuel in its supply chain - brilliant! The government hopes the fuel subsidy cut will raise 40 billion pounds.

 

 

As Reuters reports, Egypt was set to raise mainstream fuel prices by up to 78 percent from midnight on Friday, an Oil Ministry source told Reuters, in a long-awaited step to cut energy subsidies to ease the burden on its swelling budget deficit.

Food and energy subsidies traditionally eat up a quarter of state spending. The government is cutting subsidies in hopes of reviving an economy battered by more than three years of political turmoil...

 

State finances have been decimated by more than three years of political turmoil, but the government is trying to improve them without provoking a backlash from Egyptians, who have helped topple two presidents since 2011 but have yet to see an improvement in living standards.

 

Egypt's Finance Minister Hany Kadry Dimian announced deep cuts in energy subsidies in the 2014/15 budget that would save the government 40 billion pounds.

 

The revised budget seeks to reduce the deficit to 10 percent of gross domestic product in the next fiscal year, from an expected shortfall of 12 percent in the 2013/14 fiscal year.

Successive governments have failed to curb energy product subsidies, fearing backlash from a public used to cheap fuel.

"The increase will start being implemented by midnight," the source said.

 

...

 

Khaled Hanafi, Egypt's supplies minister, confirmed the cuts on private television channel Sada al-Balad, saying the state will cancel 90 octane gasoline and the price for 92 octane gasoline would be 2.60 pounds while the price for 95 octane gasoline would rise to 6.25 pounds. He also confirmed that diesel prices would rise to 1.80 pounds. Newly elected president Abdel Fattah al-Sisi has already raised electricity prices in efforts to reform energy subsidies, one of a range of politically sensitive subsidies that also cover transport, food and agriculture.

But don't worry... it won't be inflationary or impact the poor!!

"An increase in fuel prices has been expected and while it is likely that there will be some inflationary repercussions, a rise in prices to a market price is necessary," said Angus Blair chairman of business and economic forecasting think-tank Signet.

 

"It should be noted that the effect of a rise in fuel prices will not affect the poor directly, since they do not own cars," he added.

And it's not just fuel...

Electricity prices began to rise this month under a plan to eliminate power subsidies within five years, the electricity minister said on Thursday.

 

Electricity prices are set to double over five years, but the introduction of a more graduated pricing structure aims to reduce the burden on the poor in a country where one person in four lives on less than $2 a day.

*  *  *
Let's just hope the poor (and disenfranchised) do not use fuel or electricity (and are not listening to The Islamic State).

 

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Mon, 07/07/2014 - 20:10 | 4933692 buzzsaw99
buzzsaw99's picture

the usa has the highest fuel subsidy spending in the world by A LOT

Mon, 07/07/2014 - 20:19 | 4933722 idea_hamster
idea_hamster's picture

Food inflation --> "jasmine revolution"

Fuel inflation --> "cumin revolt"?  "cardamom uprising"?

Mon, 07/07/2014 - 20:26 | 4933761 NoDebt
NoDebt's picture

The 'Free Shit Army' is a global phenomenon.

Mon, 07/07/2014 - 20:35 | 4933796 kliguy38
kliguy38's picture

better get ready for a strap on comin' your way... this is JUST the beginning ... fuel will be 5 bucks/gal here by September

Mon, 07/07/2014 - 20:49 | 4933851 knukles
knukles's picture

So it won't impact the poor because the poor don't own cars.

 

Street Riots, Anyone?

Mon, 07/07/2014 - 22:05 | 4934103 Four chan
Four chan's picture

how is egypt still in existence? with everything in a mess and a populous who have managed to screw up

even history's greatest attractions, in terms of visitors. islam is just one giant monkey wrench surrounded

by a barrel of monkeys. their highest vision is a blood spattered lunar landscape, and any follower of that

truly horrible person is a brainwashed zombie from the word go. /rant

Tue, 07/08/2014 - 01:35 | 4934500 Supernova Born
Supernova Born's picture

Food and fuel inflation? The Molotov index is going parabolic.

Mon, 07/07/2014 - 20:40 | 4933812 centerline
centerline's picture

Yes.  And the game is to screw the other country by unleashing the free shit army internal to them.

Mon, 07/07/2014 - 20:33 | 4933773 AlaricBalth
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Egypt has been negotiating for a $4.8 billion IMF loan since the overthrow of Hosni Mubarak in 2011. This cut of energy subsidies is right out of the IMF playbook, right down to the narrative that the poor will not be affected.

Energy Subsidies in the Middle East and North Africa: Lessons for Reform
March 2014
https://www.imf.org/external/np/fad/subsidies/pdf/menanote.pdf

"Energy subsidies do not provide effective support to the poor, and they weigh on public finances..."

Mon, 07/07/2014 - 20:44 | 4933822 magnetosphere
magnetosphere's picture

thank you for this info.  of course the imf wants to crush the brown people and stop them from using oil that by the grace of god belongs to the bankers.

Mon, 07/07/2014 - 21:02 | 4933911 Seize Mars
Seize Mars's picture

Well done Alaric.

Mon, 07/07/2014 - 23:40 | 4934334 RECISION
RECISION's picture

This has all been covered a number of years ago in various Academic and Stategic papers.

The Poor use a LOT of oil in Egypt, it is what they cook with.

There was even studies on what percentage of their income went on buying fuel(cooking) oil.

It was significant.

And the projections of what would happen by removing the fuel subsidy, pushed something like half the population into poverty.

Between that; shortages of work, food, water, and a population demographic heavily skewed towards young and uneducated - the conclusion was that Egypt had entered a no-escape cul'de sac 5(+) years ago.

Now, that scenario is simply playing out...

 

Tue, 07/08/2014 - 03:00 | 4934565 BringOnTheAsteroid
BringOnTheAsteroid's picture

OK, fine, get rid of the fuel subsidies but get rid of the concept of the carbon tax or emissions trading.  

Mon, 07/07/2014 - 20:36 | 4933797 rubiconsolutions
rubiconsolutions's picture

Egypt raising fuel prices by 78% overnight? Sounds like another pyramid scheme to me. 

 

Mon, 07/07/2014 - 20:51 | 4933868 knukles
knukles's picture

They'll probably take it for granite

Mon, 07/07/2014 - 21:45 | 4934058 NoPension
NoPension's picture

They're all in denial.

Mon, 07/07/2014 - 22:21 | 4934135 COSMOS
COSMOS's picture

Next thing you know they'll put in a Luxory tax.

I tell you one thing, this ain't Memphis Tennessee.

Mon, 07/07/2014 - 20:57 | 4933892 falconflight
falconflight's picture

I thought the US might have among some of the highest surcharges on energy, except for the pixie dust wind mills and solar thingy.

Mon, 07/07/2014 - 20:11 | 4933697 Crawdaddy
Crawdaddy's picture

This is me getting all excited about govt reported numbers -->   "_"

Mon, 07/07/2014 - 20:13 | 4933701 crazybob369
crazybob369's picture

$5/gal coming soon to a gas station near you.

Mon, 07/07/2014 - 20:20 | 4933729 Grande Tetons
Grande Tetons's picture

From a marketing perspective it will blow past 5 to the 7 mark. People will be happy when it drops to 6. 

Mon, 07/07/2014 - 20:13 | 4933703 FieldingMellish
FieldingMellish's picture

They are doing the right thing, even if it is painful in the short term. Its pain like this the socialists in the West refuse to face but must.

 

As for your last comment:

Let's just hope the poor (and disenfranchised) do not use fuel or electricity (and are not listening to The Islamic State).

They tried that under the Muslim Brotherhood. That lasted about a year.

Mon, 07/07/2014 - 20:24 | 4933752 hairball48
hairball48's picture

And our day of reckoning here in the USA is coming too. And there will be riots here in America too when that "day" comes.

Mon, 07/07/2014 - 22:22 | 4934143 COSMOS
COSMOS's picture

Hey its the middle east, the poor just use flying carpets.  Only the rich have them cars that have AC and protect them from the sun.

Mon, 07/07/2014 - 20:13 | 4933704 Dublinmick
Dublinmick's picture

America used to have a lot of oil but BP sold it all around the world for a nice profit.

Mon, 07/07/2014 - 20:15 | 4933714 crazzziecanuck
crazzziecanuck's picture

No, it's still there.  Just mixed into the Gulf of Mexico.

Tue, 07/08/2014 - 09:23 | 4934999 tonyw
tonyw's picture

i know you're anti-British but America doesn't allow any oil or gas to be exported and BP certainly isn't the only oil company in America.

i wonder what would happen if all other countries did the same?

 

Mon, 07/07/2014 - 20:14 | 4933709 crazzziecanuck
crazzziecanuck's picture

No worries.  al-Sisi will just shoot anyone that dares complain.  What are Egyptians going to do?  Fill Tahrir Square?

Mon, 07/07/2014 - 20:19 | 4933726 hairball48
hairball48's picture

I'm going long on riots in Egypt

Mon, 07/07/2014 - 20:19 | 4933727 logicalman
logicalman's picture

Could be an interesting Tuesday in Cairo......

 

Mon, 07/07/2014 - 20:21 | 4933732 NoWayJose
NoWayJose's picture

What they really are saying is "The poor don't have enough money to afford guns or ammo" so we are not worried about them. The American version will be "The poor don't have ammo capable of penetrating the body armor we are handing out to police across the nation, nor do they have any anti-tank weapons for the armoured cars we are distributing" so we are not worried about them.

Mon, 07/07/2014 - 22:23 | 4934149 COSMOS
COSMOS's picture

Them poor folks in Teneessee are damn good at the 'HEADSHOT'

Tue, 07/08/2014 - 07:55 | 4934776 Ban KKiller
Ban KKiller's picture

Alcohol...Styrofoam...empty wine bottles, fight club!

Mon, 07/07/2014 - 20:22 | 4933736 Seize Mars
Seize Mars's picture

Don't forget, oil must be understood as a financial asset. Cutting this subsidy is of course simply a currency devaluation. The Great Eye will be pissed off, because they don't want anyone "Out-Heroding-Herod" when it comes to currency devaluations.

In other words they want the USD to be tumbling, not the other way 'round.

So, look for some ISIS action in Egypt.

Mon, 07/07/2014 - 20:54 | 4933882 falconflight
falconflight's picture

I don't think so....the Muslim Brotherhood are getting their respective heads sawed off.  There's no shortage of saws.

Mon, 07/07/2014 - 20:23 | 4933744 Flakmeister
Flakmeister's picture

This is what happens when you no longer have net exports of oil...

And the Qataris latest loan has run out...

Mon, 07/07/2014 - 20:25 | 4933757 navy62802
navy62802's picture

Global warming baby@!! LOL!

Mon, 07/07/2014 - 20:29 | 4933775 NoWayJose
NoWayJose's picture

I remember pumping $1.99 gas right after the 2008/2009 collapse. The US government 'saved' me - and now gas costs 82 percent more!

Mon, 07/07/2014 - 20:32 | 4933783 ebworthen
ebworthen's picture

The central banksters of Egypt said "there is no inflation" or "inflation is transitory".

No doubt they spent time at Oxford or Stanford learning the economic alchemy of the West, eh?

Mon, 07/07/2014 - 21:05 | 4933922 nathan1234
nathan1234's picture

Owned, trained and put to work in Egypt by the Fed and the cartel.

If Americans can be so stupid to allow control over themselves - Egypt is a piece of cake

Mon, 07/07/2014 - 20:39 | 4933808 Jack Burton
Jack Burton's picture

This same shock therapy is coming to Ukraine soon as well. Massive natural gas prices increases on the direct orders of the EU argeement on trade.

Mon, 07/07/2014 - 20:53 | 4933872 falconflight
falconflight's picture

And the EU would hanker for massive NG price increases to serve what purpose?

Mon, 07/07/2014 - 20:46 | 4933836 Dublinmick
Dublinmick's picture

Egyptian oil does not belong to them, it belongs to Isreal and Europe. They don't understand the market.

 

I predict jihad soon.

Mon, 07/07/2014 - 20:49 | 4933856 The_Prisoner
The_Prisoner's picture

Same as their kidneys

Mon, 07/07/2014 - 20:51 | 4933864 falconflight
falconflight's picture

Israel?  How so?  I mean you know that Isael discovered and developed the Egyptian oil and gas fields in the Sinai, and then gave them back in accordance with the Camp David Accords.  

Mon, 07/07/2014 - 22:37 | 4934155 COSMOS
COSMOS's picture

shhhh...we like guys that cut your head off and EAT your organs here instead of people that STEAL and use stolen organs...

http://www.theguardian.com/world/2009/dec/21/israeli-pathologists-harves...

Israel has admitted pathologists harvested organs from dead Palestinians, and others, without the consent of their families – a practice it said ended in the 1990s – it emerged at the weekend.

or

New York Rabbi Convicted Of Human Organ Trafficking Posted on by

Israel National News

By Elad Benari        Oct. 28, 2011

Jewish resident of Brooklyn became the first person in the United States to be convicted of organ trafficking on Thursday, the New York Daily News reported.

Rabbi Levy Izhak Rosenbaum, 60, pleaded guilty to selling black-market kidneys at a huge mark-up, the report said.

Rosenbaum, who admitted to brokering just three transplants, boasted on tape that he actually handled “quite a lot” during the decade-long scheme. His lawyers portrayed him as an altruistic middleman who helped save lives.

or

We like guys that play with organs of little kids.....ie the Catholic Priesthood...

Mon, 07/07/2014 - 21:18 | 4933838 conscious being
conscious being's picture

For they have sown the wind, and they shall reap the whirlwind - Hosea 8:7.

 

 

Mon, 07/07/2014 - 20:49 | 4933849 falconflight
falconflight's picture

What's up with all these very very oil and gas rich Arab/Muslim states?  They must heavily subsidize the prices for their populations because why?

Mon, 07/07/2014 - 21:22 | 4933994 conscious being
conscious being's picture

Simple.  Its a way to spread the wealth around.  Oil rich Venezuela does the same.  Why do we have EBT cards?

Mon, 07/07/2014 - 21:45 | 4934059 falconflight
falconflight's picture

So with all that in the ground wealth, little to no economic progress can be had after 50 years?  They must be the missing link.

Mon, 07/07/2014 - 21:02 | 4933910 nathan1234
nathan1234's picture

The Sissy is sending more Egyptians to the new Caliphate,

Doing a good job for their recruitment department.

 

 

Mon, 07/07/2014 - 21:28 | 4934013 Dublinmick
Dublinmick's picture

It is all a game, the last Egyptian gov the muslim brotherhood was preparing the Egyptian army to go fight Syria. Big mistake, under a little pressure they had another revolution and installed Sisi .... you know the guy with Israeli relatives.

Mon, 07/07/2014 - 21:38 | 4934043 orangegeek
orangegeek's picture

I want to ride my bicycle, I want to ride my bike.

Mon, 07/07/2014 - 23:04 | 4934254 COSMOS
COSMOS's picture

Go ahead kid but you gotta cover 50 miles in one day and be on time for work and school and get adequate sleep.  Oh and can you pick up my 50 inch flat panel tv from the store.  You can use it as a sail if the wind is blowing in the right direction.  Mucho mucho thanks.

Mon, 07/07/2014 - 23:18 | 4934288 user2011
user2011's picture

78% ?! overnight ?  Riot planned for the following months.

 

Tue, 07/08/2014 - 00:13 | 4934390 JuliaS
JuliaS's picture

If you want to find all the cops
They're hanging out in the donut shop
They sing and dance (oh whey oh)
Spin the clubs cruise down the block

All the Japanese with their yen
The party boys call the Kremlin
And the Chinese know (oh whey oh)
They walk the line like Egyptian

Tue, 07/08/2014 - 01:12 | 4934475 cape_royds
cape_royds's picture

The article should have noted that Egypt's domestic oil production is sufficient for Egypt's own consumption. That means that the subsidies represent only a loss of possible export earnings. All the subsidies did was ensure that the benefits of Egypt's oil production were widely enjoyed by the populace in the form of low-priced fuels.

Most Egyptians don't own motor vehicles, but most Egyptians nevertheless rely on motor transport in their daily lives. In the cities, most workers ride the ubiquitous white mini-buses for their long commutes. Rising fuel prices will take money directly out of the pockets of poor Egyptians, to say nothing of all the indirect price increases that will occur.

Tue, 07/08/2014 - 06:25 | 4934681 effendi
effendi's picture

cape_royds (and most others). You have no idea WTF you are talking about. Egypt has multi billion dollar debts to the various oil companies (both Egyptian and foreign) who developed the oil and gas concessions in exchange for part of the production. Egypt was taking more than its share to meet the demands for subsidised fuel. My brother-in-law fills his truck with diesel at less than half the wholesale price, another fills his taxi with petrol at less than $10 a tank full. My sister-in-law buys gas bottles (for the gas stove) at a price that is about 15% of the cost, most of that bottled gas is imported and these subsidies are costing 12% of the nations GDP.

The oil production has peaked, the gas export facilities are being turned into gas import facilities.

Bread is still 5 piastres a loaf. That is the same price I was paying 20 plus years ago. The loaf costs 35 piastres to make and Egyptians are the worlds biggest bread eaters (and wheat importers). 

As a young man living in Cairo I used to get $1.10 for each Egyptian pound. Now I'm going back on holidays and getting 7-8 pounds for each dollar. 

The stupid subsidies allowed 40 years of fanatics to proclaim "allah will provide" as they popped out millions of extra mouths. Now the muslim FSA is running into the realities that debts need to be paid and future credit depends on paying old debt and limiting the waste.

Tue, 07/08/2014 - 08:26 | 4934853 Global Observer
Global Observer's picture

The article should have noted that Egypt's domestic oil production is sufficient for Egypt's own consumption. That means that the subsidies represent only a loss of possible export earnings.

No it doesn't. It means the subsidies represent the cost of production borne by the government. When the government removes the subsidies the cost is paid for directly by the consumers, instead of indirectly through the government. Yes, the poor and vulnerable will be negatively impacted by the move, but the government can mitigate it if they directly subsidize the poor or the items of daily necessity consumed by the poor. That subsidy bill is bound to be less than the bill for blanket subsidy on fuel.

Tue, 07/08/2014 - 02:52 | 4934556 BringOnTheAsteroid
BringOnTheAsteroid's picture

Say good-bye to law and order in Egypt. Can't imagine the public are going to sit idly by when fuel prices skyrocket. 

Tue, 07/08/2014 - 02:58 | 4934561 BringOnTheAsteroid
BringOnTheAsteroid's picture

"announced deep cuts in energy subsidies in the 2014/15 budget that would save the government 40 billion pounds".

How much of that 40 billion will be stolen, pilfered, skimmed by government officials feathering their own nests. We are in terminal decline, worldwide. Governments grow bigger and bigger, become more and more corrupt and their only solution to fixing budget deficits (caused by them) is to take more from the people.

Fuck me, no wonder violent revolutions occur. Have any of these people in the Egyptian government thought about cracking down on corruption, or sacking half of its employees.

How about this. Sack everyone in government, confiscate all their wealth (down to the last penny), settle all the bills and then start again.   

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