Egypt And The Double-Edged Sword Of Cheap Oil.
The good news for Egypt: Inexpensive oil means the government needs to spend less on its fuel subsidies for its energy-hungry population of 86 million people, the third largest in the Middle East.
The bad news: Rich oil-producing countries in the region are making less money on their primary exports and thus may eventually have to reduce the financial aid they’ve been showering on Cairo.
The price of oil has plummeted by nearly 50 percent since June, leaving benchmark crudes now trading at around $60 per barrel, down from their peak of more than $110. If the current price of oil holds, the Egyptian government is expected to save $4.2 billion on fuel subsidies in the fiscal years that spans parts of 2014 and 2015, a 30 percent reduction, says Egypt’s Petroleum Minister Sherif Ismail.
Related: Did The Saudis And The US Collude In Dropping Oil Prices?
The low price of oil has benefits that go far beyond the subsidies, according to one company, Citadel Holding, also known as Qalaa Holding, a major business conglomerate in Egypt. In a report issued Dec. 18, the conglomerate claimed that cheap oil would help cut the country’s budget deficit and balance of payments by at least $5.5 billion.
