Egypt still subsidises around 15% of the actual cost of fuel, despite the recent fuel price hikes applied on Friday, a government source told Daily News Egypt on Saturday.
The source affirmed all petroleum products are still subsidised at different rates, adding that the actual cost formula is based on the Egypt’s share of the crude oil, the value of the partner’s production, crude oil exports, as well as the current exchange rate.
Furthermore, Egypt is currently considering hedging with fluctuations in the exchange rate, the source revealed, explaining that in parallel to continuing the oil hedging mechanism, applied in the fiscal year (FY) 2018/19, the state would secure the fuel subsidy budget in FY 2019/20 from the risks of oil price fluctuations in the international market.
According to the source, hedging is reviewed every three months with international banks, afterwards, the responsible committee will set the fuel prices based on the price of crude oil in the hedging contract.
He pointed out that the government committee concerned with reviewing the fuel prices will announce the results of the review on 30 September.
The source said that the period set to review the prices of petroleum products was specified to be three months for several reasons. First, the duration of the hedging contract is three months and is then renewed. Second, the fact that the Egyptian General Petroleum Corporation (EGPC) issues tender to import crude oil and petroleum products every three months.
Prime Minister Moustafa Madbouly has issued a decision to set up a committee to implement the automatic price indexation mechanism, linking fuel prices to the international crude oil prices and exchange rates. However, the price indexation would not be applied on liquefied petroleum gas (LPG) cylinders and petroleum products used by the electricity sector and bakeries.
Accordingly, the prices will be reviewed every three months, however, the ceiling for the change would be 10% up or down in the current prices at the time.
The Egyptian authorities decided to go ahead with slashing fuel subsidies on Friday, lifting petrol and diesel prices by about 25%. The price of octane 92 petrol increased to EGP 8 per litre, up from EGP 6.75. The price of octane 80 petrol and diesel fuel both increased from EGP 5.50 to EGP 6.75.
Moreover, the price of octane 95 petrol increased from EGP 7.75 to EGP 9, a 17% increase, while LPG cylinders increased by 30% to reach EGP 65, up from EGP 50 for household usage, while commercial LPG reached EGP 130.
Moreover, natural gas prices also increased, recording EGP 85 per million British thermal units (BTU) for brick kilns, EGP 3.50 per cubic metre for cars.
Meanwhile, the gas price for households registered EGP 2.35 per cubic metre for the 0-30 cubic metres consumption segment, EGP 3.1 for the second segment of between 30-60 cubic metres, and EGP 3.6 for the third segment of more than 60 cubic metres.
The government kept the price of fuel oil for the food and electricity plants unchanged.