Egypt to curb fuel subsidies
Egypt to curb fuel subsidies
The announcement follows a preliminary deal reached with the International Monetary Fund on Tuesday for a $4.8 billion loan to support the state's finances. The deal included an agreement to rein in wasteful spending on hefty fuel subsidies.
Many ordinary Egyptians are worried that the IMF deal will mean tough austerity measures, so these steps will test the public response. Economists say the terms are not onerous and the government insists steps will still protect the poor.
Planning and International Cooperation Minister Ashraf Al-Araby said 95-octane fuel, the highest grade available, would be sold at "real cost" and this would go into effect within days. He added that there would be a consultation with the public on how to work out a quota system.
Prime Minister Hisham Kandil had told Reuters on Monday that removing the subsidy on 95-octane fuel would save the state 55 million Egyptian pounds ($9.01 million) a year.
Kandil also said quotas for other subsidized fuel, operated by a system of smart cards, would allow drivers enough fuel to get to and from work, but not other journeys such as holidays.
The prime minister said the quota for each driver or vehicle still had to be worked out to ensure it was fair and did not hurt the poor, who often drove older, less efficient cars.
Drivers pay 2.75 Egyptian pounds ($0.45) a liter for 95-octane fuel, well below the international price. The price of lower octane fuel, sold at an even bigger subsidy, is used more widely by the poor.
Oil prices drop amid surprise jump in US stockpiles
- US West Texas Intermediate crude was down 36 cents, or 0.5 percent, at $67.72
- On the demand-side, intensifying risks over trade tensions between the US and China could drag on the global economic outlook, BMI Research said
TOKYO: Oil prices dropped on Wednesday after an industry group reported that US crude inventories rose last week, defying analyst expectations for a significant reduction.
Brent futures were down 31 cents, or 0.4 percent, at $71.85 a barrel by 0240 GMT. They rose 32 cents to $72.16 a barrel on Tuesday, after earlier touching a three-month low.
US West Texas Intermediate crude was down 36 cents, or 0.5 percent, at $67.72. It settled up 2 cents at $68.08 a barrel the session before, coming off a nearly one-month low.
The benchmarks had steadied after big declines on Monday and last week as supply disruptions in Venezuela came to the fore and as analysts had been forecasting a decline of 3.6 million barrels in US inventories for the week through July 13.
But the specter of oversupply quickly returned, with a rise of more than 600,000 barrels in US crude stockpiles, reported by the American Petroleum Institute late on Tuesday.
Official numbers from the US Department of Energy’s Energy Information Administration are due at 10:30 a.m. EDT on Wednesday.
On the demand-side, intensifying risks over trade tensions between the US and China could drag on the global economic outlook, BMI Research said.
“Despite US-China trade tensions, the economic outlook is broadly positive, but a number of headwinds are emerging, not least a stronger dollar, rising inflationary pressures and tightening liquidity,” BMI said.
“Slowing trade growth will weigh on physical demand for oil, with the shipping, road and air freight sectors an important pillar of demand globally,” BMI said.
One US central banker added her voice late on Tuesday to those sounding caution on trade.
Kansas City Federal Reserve Bank President Esther George said that uncertainty over US trade policy could slow the economy, even if the recently imposed tariffs in and of themselves are too small to have a big impact.
George called trade policy a “significant” downside risk to her outlook for economic growth, even as tax cuts and other fiscal policy is an upside risk.