Brent crude oil prices jumped to reach approximately $91 per barrel this week for the first time since 2014, representing an approximately 10 per cent increase since the beginning of 2022.

The prices of oil worldwide have been increasing over the last five weeks, driven by the economic effects of the Omicron variant of Covid-19, geopolitical instability, mainly in Ukraine, rising demand and limited supply, and output figures by the Organisation of the Petroleum Exporting Countries (OPEC).

Petrol prices generally move in synch with crude oil prices. Egypt’s Automatic Fuel Pricing Committee is preparing to announce new petrol prices after postponing an announcement due in January.

Tarek Al-Molla, Egypt’s minister of petroleum and mineral resources, said that the rapid fluctuation in oil prices was behind the postponement of the meeting, which was scheduled to be held before mid-January, to determine new prices of fuel for the next three months.

With the significant increases in the price of Brent crude oil during the last three months, it is expected that petrol prices in the local market will increase by about 10 per cent, which is the maximum allowed for a single increase in fuel prices.

In 2019, the government began applying an automatic-pricing mechanism to petroleum products after it gradually eliminated subsidies on them. This mechanism means that the prices of petroleum products are reviewed every three months by the committee. Based on developments in international oil prices and the exchange rate of the pound against the US dollar, the percentage of any increase or decrease in prices may not exceed 10 per cent.

A litre of 80 octane petrol is currently sold at LE7, a litre of 92 at LE8.25, a litre of 95 at LE9.25, and a litre of diesel at LE6.75.

Al-Molla added that the ministry is currently in dialogue with international consulting companies in order to calculate the price of fuel to be factored into the 2022-2023 budget, which begins in July.

“Many countries have been recovering from the economic effects of the coronavirus pandemic, creating a rise in demand for oil amid limited supply,” Gamal Al-Qalyubi, professor of petroleum and energy engineering at the American University in Cairo explained. This had led prices to rise, he added.

The price hike has been expected since the US Biden administration said in November 2021 that it would tap the US Strategic Petroleum Reserve as part of a global effort by energy-consuming nations to cool the rapid rise in fuel prices. The US move was part of a coordinated effort between the US, India, China, Japan, the Republic of Korea, and the UK.

The US announced that it would withdraw 50 million barrels from its Strategic Reserve as well as import large quantities of oil during the coming period. Moreover, OPEC and its allies, known as OPEC+, are proceeding with a plan to raise monthly output by 400,000 barrels per day. In 2020, oil production in the OPEC countries stood at some 30 million barrels per day.

Investment bank Goldman Sachs sees Brent crude prices at $90 per barrel continuing in the first quarter of 2022 and then becoming $95 in the second quarter and $100 per barrel in the last two quarters.

According to the Beltone Investment Bank, gas exports will compensate for the expected rise in Egypt’s energy import bill as a result of the higher oil prices.

However, it said that raising petrol prices on the back of the higher oil prices would be a main challenge because it would constitute additional inflationary pressure on Egypt’s economy. The prices of food commodities move according to the movements of oil and petrol prices, given that food commodities represent 34 per cent of the basket measured by the consumer price index.

Egypt’s total oil production increased by 8.4 per cent to record 82.4 million tons equivalent in 2021, compared to more than 76 million tons equivalent in 2020.

The highest price of oil was in 2008 when the price of a barrel reached $136.

*A version of this article appears in print in the 3 February, 2022 edition of Al-Ahram Weekly.