It is difficult to make use of the low price of Brent Crude and import additional quantities of crude or petroleum products at present due to a lack of financial resources in the form of foreign currency needed to do so, said Tarek El Molla, Chairman of the Egyptian General Petroleum Corporation (EGPC).
El Molla said that Egypt is considered an importing country for crude oil and petroleum products, not an exporting one, and thus low Brent prices is in Egypt’s favour in terms of decreasing the fuel subsidy bill.
El Molla explained that petroleum product subsidies for FY 2014/2015 fell to EGP 75bn from EGP 100bn for the previous year as a result of the low price of Brent.
He noted that subsidy allocations were calculated for $105 per barrel of crude, but Brent prices dropped to $69.7 per barrel.
On a related note, Medhat Youssef, former Vice Chairman of the EGPC, said that a decline in subsidies for the current fiscal year will also lead to a reduction in the state budget deficit and improve the financial status of the EGPC.
He expected a further decline in Brent prices after Saudi Arabia refused to reduce its oil production, anticipating that prices would fall to $65 per barrel by the end of the month.
Youssef explained that Saudi’s continuing to increase crude oil production, the sales of Iraqi oil at low prices on the world market by the militant group ISIS, and the United States storing large quantities of crude and exporting at low prices would all lead to a decline in Brent prices globally.
He said that supply of crude oil was greater than necessary on global markets, which would positively affect importing countries and lead to heavy losses for importing countries.
Brent Crude prices fell to their lowest levels since December 2010 at $69.7 for early transactions Sunday.