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Wednesday, 29 January 2020

Fuel prices down

Fuel prices decreased this week after the introduction of a quarterly pricing scheme, reports Ahmed Kotb

Ahmed Kotb , Tuesday 8 Oct 2019
Fuel prices down
Egyptians are paying LE0.25 less per litre as of last Friday (photo: Reuters)
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The Ministry of Petroleum’s Automatic Fuel Pricing Committee announced a decrease in the prices of petrol and diesel products for the first time last Thursday after years of hikes as part of a gradual process to lift subsidies on fuel.

The price of a litre of octane 95, octane 92, and octane 80 fuel went down by 25 piastres to reach LE8.75, LE7.75 and LE6.5, respectively. The natural gas used for vehicles as well as diesel prices were kept without change at LE3.5 per cubic metre of gas and LE6.75 per litre of diesel.

The price of mazut fuel for industrial use was lowered by LE250 per ton and is currently at LE4,250.

The committee said in a statement that the decision had taken into consideration the cooling of Brent crude oil prices on international markets between July and September to $62 per barrel, in addition to the decrease in the value of the US dollar against the Egyptian pound.

The new prices come three months after the government’s decision to apply a quarterly price-indexation system based on global fuel prices, the exchange rate of the Egyptian pound against the US dollar, and other local factors.

It had earlier raised fuel prices in July for a fifth time since 2014, by which prices have gone up by 16 to 30 per cent depending on the product. The government said then that the quarterly indexation system would be implemented, but the prices of petroleum products would not increase or decrease by more than 10 per cent on a quarterly basis.

The government announced in 2014 that it would gradually lift energy subsidies over five years as part of an economic reform programme that aims to trim the budget deficit and as part of a $12 billion loan deal with the International Monetary Fund (IMF).

Khaled Osman, a member of the Automatic Fuel-Pricing Committee, said in a television interview on Friday that Brent crude oil prices and the value of the dollar had gone down by two per cent, making the committee decide on the 25-piastre decrease on octane products.

Brent stood at around $58 per barrel on Tuesday, while the dollar was priced at approximately LE16.3.

However, Osman added that diesel prices had remained the same, leaving its value as it was for another three months.

“It is nice to see a decline in fuel prices for a change, despite the small amount which is unlikely to make a noticeable difference in the market,” said Nouran Nasser, a Cairo car-owner who drives 50km a day to work.

Since most taxis and transport vehicles are run by diesel, the fares of most means of transportation remain without change.

Traders also expect no change in the prices of food products and poultry, since the drop in fuel prices does not include diesel and butane gas cylinders. “Most poultry farms operate using butane gas and diesel as main sources of energy,” said Abdel-Aziz Al-Sayed, head of the poultry division at the Cairo Chamber of Commerce.

He added that poultry prices in the local market would not be lowered as a result of the decrease in fuel prices. “If the government decides to supply poultry farms with natural gas for heating, prices will drop significantly,” he pointed out.

The government also announced in a statement last Thursday that natural gas prices for the cement, metallurgy and ceramics industries would be lowered in a long-awaited move by the industry.

The price of natural gas for cement factories went down to $6 per MMBtu (million British thermal units) from $8, while metallurgy and ceramic manufacturers will now buy natural gas for $5.5 per MMBtu instead of $7.

Ahmed Al-Zeini, head of the building materials division at the Cairo Chamber of Commerce, believes the decision will lead to lowering the prices of building materials by five per cent at least.

“The decision is very positive and will help give locally produced building materials a chance to compete in the international market,” he said, adding that new export markets should be possible for steel, ceramics and cement produced in Egypt as a result.

Natural gas prices for the industry will now be reviewed every six months, according to the government, and the Automatic Fuel Pricing Committee is expected to review fuel prices again in January 2020.

It may decide to keep the current prices or increase or decrease them within a 10 per cent limit based on the average prices of Brent crude oil and the US dollar during the previous three months.

*A version of this article appears in print in the 10 October, 2019 edition of Al-Ahram Weekly.

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