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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buzzsaw99's picture

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

idea_hamster's picture

Food inflation --> "jasmine revolution"

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

NoDebt's picture

The 'Free Shit Army' is a global phenomenon.

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

knukles's picture

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


Street Riots, Anyone?

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

Supernova Born's picture

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

centerline's picture

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

AlaricBalth's picture

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

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

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.

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...


BringOnTheAsteroid's picture

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

rubiconsolutions's picture

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


knukles's picture

They'll probably take it for granite

NoPension's picture

They're all in denial.

COSMOS's picture

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

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

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.

Crawdaddy's picture

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

crazybob369's picture

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

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. 

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.

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.

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.

Dublinmick's picture

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

crazzziecanuck's picture

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

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?


crazzziecanuck's picture

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

hairball48's picture

I'm going long on riots in Egypt

logicalman's picture

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


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.

COSMOS's picture

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

Ban KKiller's picture

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

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.

falconflight's picture

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

Flakmeister's picture

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

And the Qataris latest loan has run out...

navy62802's picture

Global warming baby@!! LOL!

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!

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?

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

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.

falconflight's picture

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

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.

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.  

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...

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.


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.


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

conscious being's picture

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



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?

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?

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.