The fuel subsidies bill rose by about EGP 10bn during the first quarter (Q1) of this year, due to the rise in the price of oil barrels to about $84 a barrel, compared to the $67 stipulated in the general state budget.
A source in the oil sector told Daily News Egypt that each dollar increase in the barrel price, increases subsidy allocations by EGP 350m per month.
He added that oil prices began to rise with the beginning of the current fiscal year (FY) reaching $71 per barrel, and gradually increased to $85 during Q1 of 2018/19.
The source pointed out that the government has postponed its negotiations on the application of the hedge agreement of the rise in prices of petroleum products, because of fluctuations in the prices of Brent oil and banks asking for the adjustment of the prices offered on barrels of oil, to match the current market situation.
The government has recently contracted with JP Morgan and Citibank, to hedge against prices of petroleum products.
The source highlighted that the prices of oil and oil derivatives have increased by about 20% than the state budget allocations, which was estimated at $67 per barrel, against a current price of $84.
He explained that the expectations put forward by the consulting offices with which the contracts are signed, regarding the price estimates of a barrel of oil in the world markets, are lower than the current situation due to political fluctuations in the region, which will affect the increase in the subsidy bill in the closing account for the current FY.
International oil companies have expected the price of a barrel of oil to reach about $100 by the beginning of next year, after expectations of a shortage of supplies, with the start of the implementation of US sanctions targeting the Iranian oil industry on 4 November.
Oil subsidies for the current FY are estimated at $89bn, according to a Brent price of $67.
Egypt imports 32-35% of its monthly fuel needs to bridge the gap between domestic production, and consumption.
Among the imported quantities of petroleum products are government agreements signed by the Egyptian General Petroleum Corporation (EGPC) with several Arab countries, mainly Saudi Arabia’s Aramco, Kuwait Petroleum Corporation, and Iraq’s Sumo.
The EGPC has succeeded in increasing the crude oil production rate by 4.3%, to reach 657,000 barrels per day, up from 630,000 barrels per day a year ago.