Fuel price hikes unlikely, says analyst

Alex Dziadosz
3 Min Read

CAIRO: Despite rampant low-grade gas shortages across Egypt last week, government and private sources said the state will likely refrain from hiking fuel prices.

“There have been a lot of rumors the government is doing this to raise fuels prices, said Mohamed Abubasha, an economist with EFG-Hermes. “I myself don’t think they are going to raise the prices of any kind of fuel.

On March 6, the local press reported that gas stations around the country had run low on two types of low-quality fuels: diesels, mostly used by microbuses, and ‘Gas 80,’ a less-refined car fuel largely used by taxis.

Because these are among the lowest grades of fuels, they are rarely used in private cars. But their prices directly effect the public transportation used widely by Egypt’s lower and middle classes.

Black market vendors reportedly began selling gas at 125 percent of its usual cost in Minya; accordingly, informal price jumps of nearly 25 percent for public transport were reported in parts of Egypt.

To date, state and private officials have offered few, if any, substantive explanations for the shortage. According to Al-Masry Al-Youm, the Egyptian General Petroleum Corporation cited fears of future price increases as the main cause of the scarcity.

Rumors quickly filled this void, with some saying supply was purposely cut so the government could jack up fuel prices. But Abubasha said this is unlikely. “[The state] is being very careful, he said.

He counted high inflation as one reason why reactions have been strong. Over the last two years Egypt has seen significant inflation, owing, in many economists’ opinions, to the government’s August 2007 decision to strip industries of fuel subsidies by 2009. In a notable move at the start of last year, the government doubled the price of mazot (fuel oil), often used in cement and brick production.

Along with higher food prices, this has pushed inflation above 10 percent in recent months, though the economy continues to grow at a rate of over seven percent.

Abubasha said that because many Egyptians live on fixed-income wages, which rarely fluctuate with the rising cost of goods caused by inflation, they tend to worry more about any cost increases. The recent dearth of fuel is no exception.

“I think the problem is now people are very sensitive, he said. “They are already suffering from very high prices.

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