Running dry

The gasoline shortage that gripped Egypt this week may be the tip of an iceberg-sized package of economic woes …  – Published on Al-Ahrem weekly online, by Nesma Nowar, 9 – 25 January 2012.

Long queues of cars formed in front of gas stations in Cairo this week, causing heavier traffic congestion than usual on major roads. Brawls triggered by the long lines also claimed one life from gunshot on Tuesday in one of the cities, 15 May, on the periphery of Cairo … //   

… The situation has been compounded, according to Arafat, by seasonal interruptions in transport and shipping which has led to a drop in gasoline supply.

While officials blame the fuel shortage on rumours and the profiteering of black marketeers one expert from the petroleum industry, who prefers to remain anonymous, says the problem has a simpler, if more worrying, cause: the government lacks the liquidity to pay for the gasoline it needs.

He points out that not only does Egypt import 30 per cent of its gasoline needs but the raw materials required to maintain domestic production facilities for the remaining 70 per cent must also be imported. Such demands are placing increasing stress on an already faltering economy.

An International Monetary Fund mission is in Cairo this week to discuss a $3.2 billion loan which could be used to help prop up the balance of payments. Over the past 12 months Egypt’s currency reserves have fallen by 50 per cent to $18 billion. Tourism, one of the main sources of foreign currency, has been battered by recent events. Egypt’s current economic situation, which has seen repeated credit downgrades has, says the source, impacted negatively on import activities across the board.

The government’s commitment to maintain such heavy subsidies on fuel, he says, is illogical, since people who can afford to buy a car can also pay more for gas.

A litre of Octane gasoline 80 is currently priced at LE0.9 ($0.15). Octane 90 sells for LE1.75 ($0.29), Octane 92 for LE1.85 ($0.3) and the highest quality, Octane 95, for LE2.75 ($0.45). Most economists agree that the subsidies that allow such low prices will have to be cut one way or another, not least because they are so inefficient at targeting the poor.

Both the source and Arafat agree that recurring shortages of gasoline, diesel and butane gas cylinders indicate a deep rooted problem of mismanagement from the government’s side. But while Arafat expects the situation to normalise within two weeks as long as the government continues to supply the market with additional quantities of fuel and car drivers rationalise their consumption, the anonymous says the underlying problems will continue as long as “the new government replicates the same mistakes, and follows the same policies, as its predecessor”. (full text).

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