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Issue No. 655
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Al-Ahram: A Diwan of contemporary life (511)

Gas pains

Dr Yunan An increase in the price of gasoline in 1932 had Egyptians railing. What made them especially defiant was their refusal to believe the reasons for the hike. Professor Yunan Labib Rizk* explains the situation as was depicted by Al-Ahram

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Abboud; El-Sawi
On 1 October 1932, Egyptians awoke to the cry of the kerosene merchants selling their product for 10-and- a-half piastres a litre. Only the day before the same quantity cost six-and-a-half piastres. Automobile owners were in for a similar surprise: gasoline prices had shot up overnight from 26 to 32 piastres a litre. The countryside was not to be spared. Telegrams poured into the offices of Al-Ahram in the provincial capitals voicing shock and dismay and appealing to authorities "to put a stop to this intolerable situation for which there is no justification whatsoever", as one correspondent put it.

Only decades earlier, the price hike would not have precipitated such an outcry. After all, the transition from traditional sources of fuel, notably coal, in the cities, and dung, in the villages, was relatively recent. By the 1930s, the appliances and machinery that depended on petroleum fuels had proliferated and become day-to-day necessities.

A simple scan of the advertisements in the press at the time is sufficient to provide numerous examples. One is the kerosene stove that had become so commonplace in urban and rural homes, much to the delight of the Primus Company that had given its name to this appliance. While compared to the large kitchen ranges of today this appliance seems relatively primitive. At that time it was regarded as a marvelous invention, sparing consumers from the hassles of charcoal, even if that began to put the familiar coal vendor out of work, just as other modern conveniences were causing the extinction of many other professions, such as water carriers, that had once been part of the daily scenery.

Another example were the kerosene mantle lamps and lanterns. True, by then, upper class quarters in the cities had been equipped with electric lighting for half a century. However, people in the less well-off urban quarters and throughout the countryside were dependent upon the more rudimentary forms of lighting and would have been particularly hard hit by the sudden rise in the price of kerosene.

Whereas only a few decades earlier the automobile had been an awe-inspiring rarity, by the 1930s it had become not only familiar but a commonplace and, in some quarters, a necessary mode of transportation. Al-Ahram of 7 November 1932 offers statistics to indicate just how widespread the car had become. "There are 30,384 automobiles in Egypt, 1,016 of which are registered to the government and the remainder of which are owned privately by individuals or companies. In addition, there are 6,371 taxicabs, 4,610 trucks, of which 762 are registered to the government, and 1,345 busses, of which 93 are registered to the government. Regarding the privately owned automobiles 17,593, or 60 per cent, are imported from American firms."

It is noteworthy that the economic depression, in spite of its severity, had no appreciable effect on the use of motorised vehicles. According to the newspaper's report, automobile sales in 1931 fell by only 746 from the previous year, or only by three per cent; the number of new taxis fell by 644, or approximately nine per cent; and the sale of heavy transport vehicles dropped by 39 or approximately one per cent.

Justifying the sudden price hike, spokesmen for the fuel distribution companies pointed firstly to the supply shortages created by the global economic crisis and secondly to the prohibitive taxes the government had levied on petrol in order to compel commuters to use rail transport. "The companies, thus, had only two alternatives to choose from: bankruptcy or raising prices. Naturally, they resorted to the latter," company officials said.

Not all were persuaded by the explanation, including Al-Ahram. In an attempt to identify the true reasons, the newspaper's Alexandria correspondent argued that the fuel distribution companies operating in Egypt had reached a pact "to set aside their intensive rivalries which had cost them considerable material loss". In other words, the companies had spurned the capitalist principle of competition in favour of monopoly and the consequent ability to put consumers in a stranglehold.

It was not long before Al-Ahram uttered the name out loud under the headline, "Monopolies and their equivalents -- the public protests that aggravated the situation on the occasion of the petroleum price hike". The article noted that the pact between the petroleum firms had several precedents within recent months. The federation between the Salt and Sodium Company, the Kafr Al-Ziyat Cotton and Cotton Seed Company and a number of vegetable oil companies had allowed the price of a litre of oil to rise from 42 to 62 piastres. A similar consortium was formed in the cement industry, causing cement prices to skyrocket from 140 to 210 piastres a ton, of which the government levied a 30-piastre fee. The prices of cigarettes, ice and matches had also climbed drastically due to mergers in these fields.

A report submitted by Mohsen Sadeq, director of the National Mining Authority, to the prime minister, documented the phenomenon in the petroleum sector. In 1925, Sadeq wrote, petroleum prices dropped from 13 to seven piastres a litre with the entrance of two companies into the market. Soon, the two new companies entered into talks with existing petroleum companies and by the beginning of the new year the price per litre had climbed back to 11 piastres, then to 13 piastres two months later. In November 1929 another new company, the National Petroleum Company, entered the arena, causing the price to drop from 25 to 22 piastres. Several months later, in April 1930, oil companies conferred and set the price at 26 piastres. The same scenario repeated itself in 1932, with the appearance of Egyptian Petroleum, owned by the Bank of Egypt, and the National Petroleum Company under a new management. On this occasion, prices plummeted more drastically than ever before -- from 26 to 20 piastres -- until the companies parleyed again and hitched the price up, also more drastically than before, to 32 piastres.

In response to what was commonly perceived as the voraciousness of the oil companies, it was felt that the very least Egyptians could do was to cut down on consumption. But "the very least" would have entailed more than a mere gesture. It is one thing to reduce consumption of luxury items and goods that are not daily necessities; it is another to do so with a commodity as essential as fuel. People would have to accustom themselves to dimmer light, or no light at all, after dark, to revert to the traditional clay ovens and, if car owners, to keep their vehicles garaged for an indefinite period of time. Nevertheless, Al-Ahram appeared to believe the option was viable.

In his column, "Short but Significant", Ahmed El-Sawi Mohamed appealed to his fellow countrymen to take a determined stance. "Had this flagrant hoax struck any other people, they would have raged against it like a lion. We have before us our brothers in Syria and Lebanon who boycotted electricity and who refused to ride the trams for months in protest against the monopolies, which were ultimately forced to reduce prices. The people of Damascus and Beirut had to endure great hardship, but they emerged victorious, their heads held high and their dignity assured."

El-Sawi Mohamed went on to urge Egyptians either to call a complete halt to the use of kerosene and gasoline for two or three days or to reduce their consumption of these fuels significantly over a longer period of time. With regard to the latter option he said, "If we cut down to half our ordinary consumption, the companies will suffer such drastic losses that they will have to bring prices back to their initial levels. Moreover, we will have made them realise that they are dealing with an educated, noble and patriotic people, prepared to stick together through thick and thin."

Another article, appearing on the front page on 8 December 1932, spoke of "the public's duty in safeguarding its interests". The most sensitive form of inflation was that which affected primary necessities upon which depended the poor, declared its author, Abdallah Hussein. "This sector of the population constitutes the vast majority of the nation, and kerosene and gasoline are high on the list of their primary needs. Kerosene is that fuel we use to cook our food and is the source of light in the villages and in the homes of the poor in the cities. It is also the fuel that powers mills, irrigation machinery and production plants. Gasoline is the fuel that powers automobiles and greases machine parts."

In Hussein's opinion, Egyptians were easy victims for the wiles of monopolies. This was because they lacked grass- roots organisations to mobilise them or, as he put it, "In the social sphere (as distinct from the sphere of politics and political parties), Egypt has no organised units to defend the public against injustice and discrimination." In this, Egyptians stood in sharp contrast to the British who "unite against every attempt to encroach upon the interests of the people, such as price hikes and monopolies".

The writer concludes with an appeal to the "right-minded" Egyptian public "to remain vigilant and united against all forms of tyranny and underhandedness, whatever the source". He adds, "It is not enough merely to declare one's outrage. Whenever and wherever injustice raises its head people must unite to prevent and destroy it." Unfortunately, Hussein fails to advise his fellow Egyptians on precisely what actions they should take once they decide to unite.

It was also hoped that the government would pressure the petroleum firms into lowering their prices, all the more so as there had been no developments in the international market to justify the sudden price hike. In fact, according to Al-Ahram, the opposite seemed to be the case. The newspaper reports that, even until 15 November, the price of Romanian kerosene upon delivery in Alexandria was 3.8 piastres a litre. Even after calculating the various fees and taxes levied by the government the price came to no more than 4.6 piastres a litre. "In light of the high rates of consumption, the companies' profits were enormous when kerosene was sold at 6.5 piastres a litre. At the new rate, the companies are earning a profit of over 100 per cent, an outrageous percentage without the slightest doubt."

The same report alerted readers to an interesting detail. In Romania, gasoline was sold by weight whereas in Egypt it was sold by volume. "Experts estimate that because of the heat in our climate, gasoline increases in volume by 10 to 15 per cent of its volume at source. This difference ends up in the coffers of the petroleum companies."

Not only had petroleum prices remained stable, but according to one Al-Ahram item there were indications that the prices were going down. This item was a report published in a US newspaper to the effect that the price of a gallon of gasoline in New Jersey had dropped by 3.5 cents. Moreover, the distributing company, Standard Oil, had announced even greater reductions in the District of Columbia and North and South Carolina.

In addition to popular and official forms of pressure, some suggested increasing production of Egyptian oil fields. Apart from the obvious impact this would have on prices, boosting local production would also give Egyptians greater control on pricing policies. Yet, although officials indicated that the solution might be feasible with regard to gasoline, they did not offer a similar hope for kerosene. Al-Ahram explains: "With regard to the first substance, it is possible to extract quantities that are relatively high in cost compared to the rates of consumption. This, in turn, could have a significant impact on gasoline prices on the condition that exports were prohibited, efforts were made to improve its quality and all obstacles preventing consumers from using locally produced gasoline were eliminated."

Official statistics, moreover, offered grounds for optimism. The previous year, Egypt had imported 22,000 tonnes of gasoline and produced domestically 8,000 tonnes, or approximately a third of the quantity consumed. Such figures put paid to the contention of Shell, which together with another foreign oil company distributed 80 per cent of the quantities of gasoline in Egypt, that it would be impossible to up domestic production. What company officials failed to mention was that the Anglo-Egyptian Oil Field Company, which had the concession on domestic production, was a Shell subsidiary. Apart from that, upping consumption of domestically produced oil faced two obstacles: the costs of transport from Suez to Cairo and quality. Still, with regard to the former, Shell had already put in a bid with the Egyptian government to pave the Suez-Cairo road and, with regard to the latter, the newspaper argued that it was possible to upgrade refinery methods "so as to raise quality to the desired level".

A third alternative was to import petroleum from countries prepared to offer it at prices lower than those charged by the monopolies. Those advocating this option were thinking in particular of Iraq and Russia. On 7 October 1932, Al-Ahram announced that a major petroleum company in Iraq had approached the Egyptian government over a possible deal that would offer Iraqi oil at "moderate rates" and at "conditions that would satisfy the public". The report continues, "Negotiations are still in progress. Iraq, as all are aware, has huge reserves of petroleum. If the current negotiations are crowned with success, we would have a solution to this problem that had been precipitated by the sudden rise in the prices of kerosene and gasoline." Hopes for this solution increased following a report that the Iraqi Consulate in Egypt had asked the Ministry of Foreign Affairs to provide it with statistics on the consumption and production of petroleum fuels in Egypt and on the number of gasoline powered vehicles.

With regard to Russia, the Egyptian press hailed recent news regarding its petroleum policy. In recent conferences of petroleum producing countries in New York and Paris, Moscow had opposed the proposed Kessler agreement to set a global production ceiling. Instead, it initiated an ambitious project to lift production from 22 million tonnes in 1931 to 30 million by 1938. Al-Ahram goes on to report that government sources had informed its correspondents that Egypt was currently communicating with the Soviet Union with an eye to purchasing petroleum. If such communications proved successful, "it will have a profound impact on the Egyptian market," it remarked. One cannot help but wonder whether the "sources" had taken into account the many political hurdles the government would have to surmount in the process.

In the meantime, some began to seriously contemplate another possibility, one that would have far- reaching ramifications. The creation of a national petroleum company, whether publicly or privately owned, could be a highly effective means to break the hold of foreign owned firms.

There were several oil companies operating in Egypt at the time, among them Shell, National, the Egyptian Company, a Russian oil company and the Anglo-Egyptian Oil Field. When some Al- Ahram readers expressed their surprise that two of these companies, the Egyptian Gas Company, a subsidiary of the Bank of Egypt, and National Gas, under the management of Abboud Pasha, had joined the others in agreement to raise kerosene and gasoline prices, another reader, Abdel-Aziz Azmi, wrote in to offer an explanation. The two companies could not be regarded as Egyptian, Azmi declared. "These two companies have a combined capital of LE200,000, of which the Bank of Egypt and Abboud have a LE40,000 share. In other words, Egyptians own only a fifth of their stock, the remainder being owned by Greeks and Italians. As a result, the Egyptian contingents in these two companies were unable to compete with the resolve of the other companies to raise prices because their say in their own firms is only as strong as their percentage of shares, and a fifth is a very small percentage."

A similar situation applied to the Russian oil company. Some had pinned their hopes on the ability of this company to import kerosene and gasoline from the Soviet Union at competitive prices. Azmi disappointed them. The company had stopped being Russian shortly after the Bolshevik Revolution when the founder after whom it was named died. The company had left three sons, all of whom took Swiss nationality. Of these, only one managed the affairs of the company, which now imported all its needs from Romania.

The solution, creating a purely Egyptian petroleum company, was first reported in Al-Ahram of 16 October 1932. A small news item in this edition reports, "A group of Egyptian financiers and the board of directors of the Chamber of Commerce in Cairo are contemplating the establishment of a nationally owned petroleum company in order to rescue consumers from the trickery of foreign companies. A meeting has been held in the office of the director of the Mining Authority, attended by Mahmoud Sami, former Egyptian ambassador to Washington and El-Sayed Abdel-Meguid El-Rimali, in order to discuss all aspects of the plan and to take the necessary actions accordingly."

The news inspired considerable enthusiasm, as was evidenced by the many letters to the editor urging the government to furnish all possible support to the new company "until it is able to stand on its own two feet and compete effectively against the kerosene and gasoline monopolies". The author of this letter continued, "The government has already given indications of its willingness in this regard. We have heard that it is considering increasing the export fees on Egyptian gasoline and that the mining and chemical authorities are currently experimenting with new refining techniques in order to render Egyptian gasoline suitable for all types of motorised vehicles."

One reader took exception with the general view. Setting up a new company from scratch was too long-term and too risky. Instead, he suggested that the Bank of Egypt, "the nation's economic citadel and financial refuge," reach out to the entrepreneurs who had considered forming a new company so as to enable them to purchase a majority of the shares in the already existing Egyptian Gas Company. "In this manner, the Egyptian party will be able to assume effective control over this company. Once in that position, they can then work to liberate the company from that pernicious agreement and, simultaneously, free the neck of the nation from the noose of the cartel." On the other hand, he adds, should the Bank of Egypt prove unable to secure a majority share in Egyptian Gas, it should withdraw from that company and join forces with the team of Egyptian entrepreneurs in founding a new company, which would receive various forms of support and encouragement from the Egyptian government until it became commercially viable.

It appears, however, that interest in creating an Egyptian-owned petroleum firm gradually faded, as did Al-Ahram's enthusiasm for the idea, if we are to judge by the decreasing attention it accorded to the subject. In fact, the last news item on the subject appeared on 7 November 1932. Relating that the government had not yet responded to the request made by the company's founders for new premises, the report along with the newspaper's silence henceforth, seemed to consign the project to oblivion. Egyptians would have to wait many more years before they could free themselves from the stranglehold of foreign monopolies in petroleum and other commodities.

* The author is a professor of history and head of Al-Ahram History Studies Centre.

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