The recent rise in diesel fuel prices has induced an assortment of reactions. Sherine Nasr reports Over the past decade, the government has made a point of maintaining the price of diesel fuel (commonly referred to as solar fuel in Egypt) at 40pt/litre. Seeing as how it is the most widely used form of fuel in both public transportation as well as the movement of goods, keeping diesel prices stable was an attempt by the government to also keep the prices of other goods under control. According to a source at a multinational oil company's retail sales department, "the government paid LE5 billion to subsidise diesel" in 2003. Starting last Friday, however, diesel prices suddenly rose by 50 per cent -- going up from 40pt/litre to 60pt/litre. The increase is the first in 11 years. Analysts said a government decision to drastically cut customs tariffs on vehicles and other transport components might have been the catalyst for the decision to raise the price of diesel. Government coffers, after all, needed to be replenished to make up for the revenue that would be lost as a result of the customs reductions. For oil companies, the increase has been much anticipated. "It is unreasonable to import large quantities of diesel annually in hard currency," said the oil industry source, who claimed that the actual cost of a litre of diesel is estimated at 180pt. Although the price has gone up by 50 per cent, some remained unsatisfied. "This is just a step in the right direction," the source said. "It is minimal, however, because such a big difference still exists between the actual cost and the present price of diesel." He suggested that the government should have seized the opportunity and imposed a more meaningful increase. At the very least, he said, it should have primed public opinion for a second increase, which will "inevitably take place within the next year or two." The public, meanwhile, has been grasping at straws regarding the potential ramifications. Only a few days after the price hike, the fees for some forms of mass transport went up. In Luxor and Aswan, privately-run buses raised their rates. In response, the Interior and Local Development Ministries have been doing their utmost to contain the situation before it spreads to other governorates. Their aim is to stabilise the fees or, at worst, guarantee that increases will not exceed 25 per cent. Hoping to mitigate the decision's impact, it has also been made abundantly clear that baladi bread bakeries that operate on diesel will continue to receive their fuel quota at the old rate of 40pt. Experts and gas station owners were highly critical of that idea, however, arguing that having two prices for the same product would only serve to catalyse numerous cases of market fraud. "This is only the beginning, and it is not a very promising one," said accountant Mohamed Mahmoud, who added that while the government cuts tariffs with one hand, it increases the prices of other vital products with the other. "I am positive that the next thing that will increase will be the price of gas," Mahmoud said. His fears are well founded. Oil experts have been calling for a rise in the price of gasoline for a long time now. "It is only logical that the government should direct subsidies to other more challenging areas like health and education," said the oil industry source. The price of fuel, in its different forms, is still cheaper in Egypt, he said, when compared to other countries -- including those that are major oil producers. It is estimated that the government pays some $2 billion annually in subsidies for petroleum products. The price of fuel oil (also known as mazot ), meanwhile, has quietly increased by over 60 per cent over the past 9 months. "The increase has been ratified by the government without any public announcement," said the oil executive. Whereas a tonne of fuel oil cost LE180 at the beginning of the year, it now sells for LE300. Fuel oil is widely used by the cement industry, and is also the sole fuel used in brick ovens, as well as a good number of baladi bread bakeries. The rise in prices will probably have a "negative impact on the construction sector," the source said, "which is already facing many problems."
