Al-Ahram Weekly Online   19 - 25 January 2012
Issue No. 1081
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Published in Cairo by AL-AHRAM established in 1875

Running dry

The gasoline shortage that gripped Egypt this week may be the tip of an iceberg-sized package of economic woes, writes Nesma Nowar

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A fuel crunch crippled Cairo and caused heavy traffic congestion. The gas shortage reflects a deep rooted problem of mismanagement from the government's side

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.

Other gas stations were closed, displaying no gasoline signs. Predictably, gasoline was available on the black market, at up to six times the pump price. Karim Mabrouk, who lives in 6 October City, received offers to have the gasoline he needed delivered to his front door. The mark-up, though, was extortionate.

The fuel crunch crippled the activities of Cairo residents. Sarah Salah, who lives in Heliopolis, spent Monday morning trying to fill her tank. "I spent three hours visiting five stations in order to have enough gasoline to get to work," she told Al-Ahram Weekly. "In the end I had to return home."

The story was repeated across Cairo, as well as in other governorates. In Minya, Gharbiya and Sharqiya gasoline has been scarce since the beginning of the year, but the situation worsened this week.

Shortages are in the cheaper 80-octane gasoline as well as the more expensive 90- and 92-octane lead-free gasoline. Supplies of diesel are also short, while the dearth of butane gas cylinders seems endemic.

Hossam Arafat, head of the General Division of Petroleum Products at the Federation of Chambers of Commerce, says rumours of an impending price hike sent motorists lining up at gas stations.

Gasoline, diesel and butane gas cylinders are all sold at artificially low prices. Subsidies are provided through the Egyptian General Petroleum Corporation (EGPC) to keep prices of energy products to households, businesses and the government sector at a fraction of their real cost.

Energy subsidies in 2011-2012 cost the government a breathtaking LE95 billion. The current crisis was triggered, initially at least, by an earlier decision to increase the price of fuel to energy-intensive industries in an attempt to reign in a budget deficit of LE134 billion.

Government officials have repeatedly stressed there is no intention to increase fuel prices across the board.

"The problems do not lie in production," insists Minister of Petroleum Abdallah Ghorab, "but in distribution." Soon, he promises, they will be solved.

Such reassurances have had little impact on the street. An employee at a gas station in the Dokki area of Cairo reports that as soon as deliveries arrive they are sold, forcing the station to close until new supplies arrive. The fuel allotted to the station, he says, fell this month from 26,000 litres to just 6,000 litres. The number of tankers distributing fuel in the area has also decreased.

The general manager of a public gas stations, on the other hand, says fuel allotments for his station have doubled. "We used to receive deliveries of 40,000 litres, which were perfectly sufficient. Now we get 80,000 litres and it's finished almost immediately."

"At this time of the year 13 million tonnes of gasoline and 30 million tonnes of diesel a day would normally be sufficient," says Arafat. But rumours of price increases and the resulting panic buying has seen demand shot up by 50 per cent.

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".

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