Fuelling inflation

Safeya Mounir , Tuesday 26 Mar 2024

Rises in the prices of petroleum products have been spilling over into commodity prices and overall inflation rates, reports Safeya Mounir

The price of diesel, the fuel most used in transportation, increased by 21.2 per cent
The price of diesel, the fuel most used in transportation, increased by 21.2 per cent


The prices of several petroleum products went up on Friday morning, with the hikes ranging between eight and 33 per cent. The rises, the first in 2024, were adopted following a meeting of the Automatic Pricing Committee for Petroleum Products (APCPP) on Thursday.

According to the committee’s decisions, Octane 95 fuel increased by eight per cent to LE13.5 per litre; Octane 92 rose by 8.7 per cent to LE12.5; Octane 80 surged by 10 per cent, reaching LE11; diesel prices skyrocketed by 21.2 per cent to LE10; and compressed natural gas for cars rose by 18 per cent to LE6.5 per cubic metre.

The increases in fuel prices translate into elevated prices of other products that use fuel in their production and transportation, in turn contributing to rising inflation rates.

Public transportation tariffs have also increased by 10 to 15 per cent. Unconditioned public transport bus tickets have increased by LE1 to LE7, while air-conditioned ones have increased to LE13. Minibus tariffs have increased to LE9 to LE10 depending on the length of the trip.

Taxi meters now start at LE8.5, with an additional charge of LE4 for every km starting with the second one. In Alexandria, taxi meters start at LE9.25, with a LE3.25 charge per km.

The recent increases announced by the APCPP surpass the maximum typically imposed, which is 10 per cent for any type of fuel, commented Hossam Arafat, former head of the Petroleum Products Division at the Federation of Chambers of Commerce.

The APCPP was scheduled to convene in January and then again in April, as usually it meets quarterly. When the January meeting was put off, fuel prices remained unchanged. The recent increases can be seen as a combination of two increases that were originally planned for January and April, Arafat said.

Butane gas cylinder prices have increased by a whopping 30 per cent, from LE75 to LE100. This hike, Arafat said, is meant to gradually shift the public away from gas cylinders and towards natural gas. Before the price hikes, butane gas was used for heating and in brick factories due to its low price.

Mazot prices have also increased, affecting the industrial sector. The mazot used in brick kilns and cement factories rose from LE6,000 to LE7,500 per ton.

In general, product prices are expected to rise by five to 12 per cent in the wake of the increases in fuel prices, Matta Bishai, chair of the Supply Committee at the Federation of Chambers of Commerce, said on TV.

Diesel is crucial for commodity transportation, and mazot is used for powering the machinery used in agriculture, such as for ploughing and harvesting. The recent hikes mean that the cost of crops will increase for final consumers.

In February, the annual urban inflation rate surged to 35.7 per cent, up from 29.8 per cent in January, according to the Central Agency for Public Mobilisation and Statistics (CAPMAS).

The jump, higher than expected, was fuelled by a sharp rise of 50.9 per cent year-on-year in the prices of foods and beverages. Meanwhile, monthly urban inflation rose by 11.4 per cent in February.

The recent increases in fuel prices are anticipated to indirectly impact inflation, dashing hopes for imminent control measures.

The APCPP attributed the recent surge in fuel prices to the “positive outcomes of recent economic reform measures, including the floatation of the Egyptian pound.”

“These reforms have directly contributed to the escalation in the cost of petroleum products, compounded by heightened transportation expenses and shipping costs for imported petroleum products, stemming from events in the Red Sea. This has led to an unprecedented widening of the price gap between production costs and selling prices. Consequently, measures were implemented to mitigate a portion of this disparity,” it said.

Mohamed Hassan, managing director of the Alpha Financial Investment Management Company, said inflation will rise due to the fuel price hikes and the appreciation of the value of the customs dollar (the value of the dollar used in customs transactions).

He noted that while the Ministry of Supply can control basic prices to some extent, the majority are likely to escalate, including the price of white bread.

Despite the global decline in grain prices, the appreciation of the price of the dollar in Egypt has raised the cost of purchasing wheat abroad, he added.

* A version of this article appears in print in the 28 March, 2024 edition of Al-Ahram Weekly

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