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Tuesday, 27 June 2017

What's behind the third Egyptian fuel crisis?

Egypt faces mysterious fuel shortage for the 3rd time this year, with inside sources citing different reasons, including: uncertainty over presidential elections, plots by Mubarak cronies and financial complications

Ahram Online, Tuesday 5 Jun 2012
Cairo hit by new fuel crisis
Cairo hit by new fuel crisis (Photo: Bassam Al-Zoghby)
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"No fuel oil, no diesel, no petrol," cried the headline in the state-run Al-Ahram newspaper on Friday.

For the third time in 2012, Cairo's petrol stations are seeing long queues as motorists wait for hours to fill their tanks with the country's dwindling supplies.

Octane 80 and 90, two of the four petrol grades commonly sold in Egypt, are in especially short supply. Diesel, too, is seemingly running short.

In the capital the shortfalls have caused large traffic jams on some of the main thoroughfares. There's even been violence at the pumps as queuing motorists jealously defend their spots.

When similar scenes occurred in January and March, Egypt authorities gave a number of explanations for the fuel shortfall; one minister blamed bad weather, which impacted imports; another attributed it to panic-buying and a spate of hoarding.

The shortages never entirely went away, but the latest crisis -- which came two weeks before the crucial runoff in Egypt's presidential elections and just hours before Saturday's verdict for ex-president Hosni Mubarak -- has prompted further finger-pointing.

There are signs it may be connected to Egypt's broader fiscal problems, with the country unable to fund the oil imports that cover a slim, but necessary portion of its fuel production.

Others on the Cairo streets, suspicious after a year of divisive military rule, mutter of a conspiracy by remnants of the Mubarak regime to stoke fears of crisis in advance of mid-June's election.

Such a move, goes the thinking, would boost the runoff chances in favour of Ahmed Shafiq, the former aviation minister, who is campaigning on a law-and-order platform.

Government ministries, overseas sources and managers of Cairo's petrol stations, however, suggest a range of factors may be to blame.

Friday's article in the state-run Al-Ahram newspaper quoted officials from the petroleum ministry who blame the diesel shortage on agricultural harvesting, which uses heavy machinery. The situation will ease in the following week as the season draws to a close, officials claimed.

Egypt's ministry of finance, in contrast, has said more than once that it has enough funds to import oil, blaming shortages on distribution problems.

On Tuesday, Egypt's finance minister said it would provide the petroleum ministry with an additional $100 million in funds so the local market has enough fuel to meet domestic needs. 

But repeated claims that Egypt may be facing a liquidity squeeze were given further credence on Friday by a Reuters report which cited overseas trade sources as saying the country is struggling to obtain bank payments to buy fuel.

The payment problems have caused shipping delays and prompted some suppliers to think again before offering oil in a forthcoming $1 billion import tender, half a dozen trade sources -- including current suppliers -- told the news agency.

The payment problems resulted in delays in diesel supplies for transport, industry and agriculture, the trade sources claimed.

Around 90 per cent of the fuel consumed in Egypt is domestically produced with the remaining 10 per cent coming from overseas.

Sources talking to Reuters said delays of up to two weeks in deliveries were a regular occurrence ahead of peak summer demand for diesel, blaming Egypt's difficulties in obtaining letters of credit from banks.

A trader involved in the transactions said banks were increasingly nervous with loans and required additional assurances as Egypt's stretched finances made it harder to pay for its heavy fuel subsidies bill.

An official at the Egyptian General Petroleum Corp (EGPC), however, denied this was the case.

"This is not true at all. All the vessels have been arriving on time...There are no payment problems," he told Reuters, on condition of anonymity.

EGPC is seeking to buy more than one million tonnes of gasoil, or diesel, from July to September worth around $1 billion via a tender that closed this week -- almost as much as it sought in the preceding six months.

But the scenes on the streets reported by Al-Ahram's Arabic-language news website also suggested something was amiss in consumer activities.

Mohammed Hassan, manager of a Misr Petrol station on Doqqi Street, told Al-Ahram that his workplace still receives its daily allocation of 70,000 litres, but that it is being consumed quickly.

Hassan said he had asked the company to provide his station with more gasoline due to a surge in demand.

"The real reason behind the crisis is not a shortage of gasoline but people's panic," he was quoted as saying, citing popular fears over social unrest should either of the two divisive candidates in the mid-June run-off secure victory.

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