A sudden increase in the price of gasoline is causing an uproar at gas pumps, writes Sherine Nasr The atmosphere at gas stations these days is rather tense. A sudden decision to increase the price of gasoline and diesel fuel by 30 per cent last Friday has caused much resentment among consumers. Regular gasoline 90-octane fuel, the most widely used in passenger vehicles is now selling at LE1.30 instead of LE1 per litre. The price had not changed since 1993. Diesel fuel -- better known as Solar and mostly used by trucks and public transportation vehicles -- has also increased from LE0.60 to LE0.75 per litre. The price of diesel had doubled in late 2004 from LE0.30 to LE0.60. Meanwhile, the price of 80-octane gasoline sold for LE0.90 a litre, and the higher quality 92-octane fuel at LE1.40 have remained unchanged. Drivers, steaming with anger but unable to do anything else, often engage in angry squabbles with gas pump attendants who themselves have no say in the matter. "It is the timing and the fashion in which the decision was made, not the pricing that made things look bad," said Emad Hassan, regional manager of a US consultancy firm. Hassan was referring to the fact that the new prices were abruptly announced on the front page of several national newspapers during the weekend, with no previous warning by the government. What made the situation worse is the fact that the rise in gas prices coincided with other increases in some vital services, such as subway fares which went up from LE0.75 to LE1 a week earlier. For its part, the government blamed the latest increase on spiralling oil prices caused by deteriorating political conditions in many parts of the world, particularly in the Middle East. "People think that when oil prices increase, Egypt makes more money," a source from the Ministry of Petroleum, who preferred to remain anonymous, told Al-Ahram Weekly. "This is not correct because we import a large amount of oil products at international prices." There is no doubt that subsidising oil products has always been a headache for the government, at a cost of LE40 billion a year. The price hikes are expected to reduce the government's huge budget deficit, forecast at more than nine per cent of gross domestic product in the 2006/07 fiscal year. Although gasoline is produced locally, Egypt's production of other vital energy products such as diesel oil which is mostly used in transportation and LPG (the product used in cooking cylinders) is hardly sufficient, yet both are extensively subsidised. According to Hassan, present gasoline prices are still nowhere near actual production costs; the actual cost of one litre of gasoline was estimated at LE1.10 when international oil prices were around $40 per barrel (LE230), "now that oil prices have jumped to $75 per barrel on the international market, the cost of a litre must reach at least LE2 in Egypt," he explained. "Thus, the present price still does not reflect the actual cost of the product." In the meantime, gasoline consumption is reported to have increased by 17 per cent during 2005, compared to an average increase of four per cent annually in previous years. "We have increasingly become a consumption-oriented culture. This manifests itself in the increasing number of vehicles which enter the country every year," noted Hassan. For these new owners, the price of gasoline is very affordable if not cheap, he added. "But when it comes to gasoline, there is a social dimension that cannot possibly be overlooked," according to accountant Amir Rizq, who explained that the latest increase will reflect negatively on the prices of every other commodity and service in the country. For a start, taxi drivers are reported to have increased their fees, while privately- owned minibus services have already increased fees by 10 to 50 per cent. Also, tickets for the East and West Delta Bus Company are expected to increase by 30 per cent within the coming few days. But the government has assured that the price of baladi bread, sold for LE0.05, will not be affected because some LE1 billion in subsidies will be used to ensure that the price of bread remains the same. "Unfortunately, public awareness is widely lacking," stated Hassan, explaining that studies have shown that fuel represents only five per cent of the total cost of transportation. "Meanwhile, bakeries do not depend on gasoline as a source of energy, therefore, raising the price of baladi would be absolutely unjustified." Hassan criticised the government for the de facto fashion it always adopts when dealing with sensitive issues such as fuel. "The government should have primed public opinion about the increase," he suggested. "Sound economic reasons why gasoline price must increase should have been given." Hassan also proposed that a deadline for achieving a target, in this case eliminating the subsidy on oil products, should have been announced.
