What Is Egypt Waiting For to Reduce Fuel Prices After Oil Drops to Its Lowest Level Since 2021?

SadaNews - Despite the global decline in oil prices to their lowest levels since 2021, fuel prices in Egypt remain unchanged, at a time when the public is awaiting the impact of this drop on energy costs locally.

The price of West Texas Intermediate crude has fallen during December to below $55 a barrel for the first time since February 2021, in the latest indication that oil supplies are exceeding demand, as the market prepares for a significant surplus. Earlier in the session, the price of Brent crude, the global benchmark, dropped below $60 a barrel before slightly rising in recent days to record $62.

Oil prices have declined this year due to expectations of a surplus, driven by a wave of new supplies from the "OPEC+" alliance and countries in the Americas, alongside weak demand growth. In recent days, hopes for a new agreement to end Russia's war in Ukraine have contributed to reducing a long-standing geopolitical premium that had been added to oil prices.

Current petroleum product prices in the markets still represent the actual cost of providing the products, despite the decline in oil to about $60 a barrel before it slightly rose to about $62, according to a government official speaking to "Al-Sharq" on the condition of anonymity.

Fuel in Egypt Is Still Subsidized

The official added that the fuel pricing committee calculates Egypt's share of crude oil produced in the country in cooperation with foreign partners at zero. He noted that there is still a subsidy for petroleum products provided in the markets, particularly for "butane gas", which receives the largest share of the fuel subsidy bill.

The fuel pricing committee in Egypt, established in July 2019, bases its decisions on increasing, decreasing, or fixing prices on the average global oil prices, the exchange rate of the dollar against the pound, in addition to production and operating costs.

While the government has set a price of $75 for the price of a barrel of oil in the budget for the current fiscal year 2025-2026, down from $82 in the previous budget, global oil prices have dropped by about 20% since the beginning of 2025, which is below governmental targets.

Medhat Youssef, former vice president of the Petroleum Authority, stated that the actual costs of fuel, especially diesel and gasoline, remain high, thus increasing the value of the subsidies allocated for fuel, indicating that the support for a single cooking gas cylinder amounts to 150 to 170 Egyptian pounds daily, which means that the state spends about 200 million pounds to support it.

When calculating the actual cost of fuel based on the current Brent price and the exchange rate of the dollar, along with operating costs, taxes, and profit margins, the real price of gasoline available in the market exceeds its current level, as the price of 95 octane gasoline reaches about 27 pounds per liter compared to the current 21 pounds, a difference that the state bears, while 92 octane gasoline records about 26.2 pounds compared to 19.25 pounds, and the cost of diesel ranges between 23 and 24 pounds per liter against a selling price of 17.5 pounds.

Egypt's Dependence on Imported Oil Products

Youssef ruled out that the decline in global oil prices would affect domestic fuel prices as long as the pace of importing liquefied gas shipments continues at its current rates, which increases costs and raises subsidy levels to unprecedented levels.

Egypt relies on imports to cover a gap of about 225,000 barrels of oil per day, as it consumes 750,000 barrels daily, while local production ranges from 510,000 to 540,000 barrels, partially covered by direct imports of crude and derivatives, making the budget sensitive to any fluctuations in global oil prices.

Osama Kamal, former Minister of Petroleum and Chairman of the Energy Committee in the Senate, stated that the issue of fuel subsidies, especially gasoline and diesel in Egypt, is primarily linked to the gap between local production and imports, especially in light of the depreciation of the pound and the rising costs of energy imports.

Kamal added that despite the positive aspect of falling global oil prices for Egypt, at the same time, the drop in price below the $55 and $60 per barrel level represents a challenge for global production companies that are hesitant to inject additional investments in exploration and production due to the lack of returns in light of the declining barrel price.

No Increase in Fuel Prices in Egypt for a Year

Egypt decided to raise fuel prices by up to 13% in the second increase this year, with the intention of stabilizing them in the local market for a minimum of one year, according to a statement from the Ministry of Petroleum and Mineral Resources.

The increase included all types of gasoline and diesel, with an increase of two pounds per liter. According to the new prices, the price of 95 octane gasoline rose from 19 pounds per liter to 21 pounds, 92 octane from 17.25 to 19.25 pounds per liter, and 80 octane from 15.75 to 17.75 pounds per liter. The price of diesel was also increased from 15.5 to 17.5 pounds per liter, while the price of car gas rose to 10 pounds from 7 pounds per cubic meter.

Egypt had previously raised fuel prices in April by about two pounds per liter, expecting to achieve savings of 35 billion pounds in the budget for the fiscal year 2024-2025.

Kamal added that fuel subsidies represent a significant burden on the Egyptian economy, particularly supporting electricity station fuel, as the stations still receive gas at a subsidy rate of about 120% above the gas price, indicating that electricity stations receive subsidized fuel of about 40 billion pounds monthly, which shows the exacerbation of support in a way that makes it difficult to reduce prices.

The Egyptian Government Cuts Fuel Subsidies by 50%

The Egyptian government has reduced fuel subsidies in Egypt by 50% in the general budget for the fiscal year 2025/2026, allocating 75 billion pounds for fuel subsidies, compared to 154 billion pounds in the previous budget.

Egypt's daily gas consumption reaches about 6.4 billion cubic feet daily, rising in peak summer to over 7 billion cubic feet daily. The country's production capacity is about 4.2 billion cubic feet daily, and the gap between demand and supply is covered through gas imports from Israel or by importing liquefied gas shipments.

Energy expert Jamal Kalloubi states that fuel subsidies are a major pressure on the Egyptian economy and that the decline in global oil prices will not significantly affect the government's ability to stabilize or lower fuel prices.

He added that the continued decline in global oil prices will help the government save a portion of the monthly allocations necessary for importing, thus enhancing the surplus achieved in the general budget, and will assist it in fulfilling the Prime Minister's commitment last October not to increase prices, which confirmed that there would be no new increases for a full year.

In last October, the Egyptian Prime Minister, Mostafa Madbouly, said: "If global oil prices remain at current levels, we will not need to increase fuel prices even after a year. Adjusting fuel prices is not only linked to the Brent price."

He indicated that the targets recently agreed upon between the government and the IMF will not impose any burdens on citizens, nor will they touch on the energy file or fuel subsidies, as all of them are focused on improving fiscal performance and economic growth indicators.