Diesel priced up

Ahmed Kotb , Tuesday 9 May 2023

Diesel prices rose for the first time in a year, naturally followed by an increase in the cost of transportation and commodities, reports Ahmed Kotb

Diesel priced up
Higher diesel prices will feed inflation


The Fuel Automatic Pricing Committee raised the price of diesel by 13.7 per cent, from LE7.25 to LE8.25 per litre, deciding to keep fuel prices unchanged.

The latest quarterly meeting of the committee took place last week and a decision to raise the price of diesel came into effect on Thursday 4 May.

Unchanged fuel prices remained at LE8.75 per litre of the octane 80 gasoline and LE10.25 per litre of octane 92 gasoline. The price of octane 95 gasoline has been kept at LE11.5 per litre.

The prices are supposed to remain into effect for the next three months until the next meeting of the Fuel Automatic Pricing Committee.

According to the committee, the decision to increase the price of diesel came in light of the rise in global oil prices and high inflation rates, the devaluation of the Egyptian pound against the US dollar, and the global repercussions from the Russian war in Ukraine.

The Ministry of Petroleum and Mineral Resources said in a press statement following the increased price of diesel that subsidies directed to diesel before the latest decision amounted to LE222 million daily, or about LE6.7 billion per month, with a total LE80 billion annually.

The ministry also stated that the Egyptian government’s subsidy of diesel had reached LE178 million daily after the recent decision to increase its price, instead of LE222 million, or approximately LE5.3 billion per month, with a total of LE64 billion annually.

Ministry of Petroleum Spokesman Hamdi Abdel-Aziz said Egypt imports from 35 to 40 per cent of its diesel needs from abroad, and that it was necessary to “move the price of diesel”.

He stressed that the actual cost of a litre of diesel is LE12.25, adding that its price has been fixed for a long time because it affects the cost of transportation and many economic sectors, making the state subsidise diesel to ensure price stability.

However, he added, the huge changes led to the latest increase in diesel prices, especially with the average annual subsidy of about LE80 billion which will currently drop to LE64 billion after the recent increase.

Diesel prices contribute directly to transportation costs, as many public and commodity transportation vehicles are powered by diesel, which in turn will affect the price of food commodities.

The decision is expected to push inflation to new highs. Already the annual inflation headline urban consumer rate rose to 32.7 per cent in March, the highest since the summer of 2017.

Many governorates in Egypt, including Cairo, have amended the transportation service fare, with an increase ranging between 50 piastres and LE1 for most lines, depending on the distance.

The Ministry of Supply and Internal Trade decided to adjust the cost of manufacturing a loaf of municipal bread following the increased diesel price, increasing the cost of making bread in municipal bakeries that use diesel fuel in the manufacturing and production process. The price will now range between 18.82 to 21.1 piastres depending on the type of bread.

The ministry also stated that citizens will receive subsidised municipal bread from ration cards at LE0.05 piastres, indicating that the state will continue to bear the difference in the cost of production and pay it to bakeries through the Supply Commodities Authority.

Head of the General Farmers Syndicate Hussein Abdel-Rahman said in a statement that the government’s decision to raise the price of diesel will contribute to the rise in the price of the cost of agricultural production, and lead to a rise in the cost of agricultural products.

Abdel-Rahman added that Egypt is affected by the rise and fall in global prices of petroleum products because of the large quantities the country imports to cover its needs.

“Raising the price of a litre of diesel by one Egyptian pound will raise the price of transporting agricultural crops,” he said, adding that this is expected to lead to a wave of higher prices for fodder, vegetables, fruits, and meat, in line with the new high cost.

According to the Central Agency for Public Mobilisation and Statistics (CAPMAS), the value of Egyptian imports of diesel recorded $3.5 billion in 2022, compared to $2.2 billion in 2021, an increase of 58.8 per cent.

Statistics from CAPMAS indicated that Egypt’s production of diesel increased to 10.9 million tons in 2022, compared to 9.7 million tons in 2021, an increase of 12.4 per cent, while the country’s consumption of diesel amounted to 14.1 million tons in 2022, compared to 13.3 million tons in 2021.

* A version of this article appears in print in the 11 May, 2023 edition of Al-Ahram Weekly

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