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Petroleum Committee

• Fuels subsidy workshop - April 17, 2005
• Subsidies in the Oil and Gas Sector: Problems and Solutions - December 5, 2004

Fuels subsidy workshop - April 17, 2005

The Petroleum Committee held a one-day “fuels subsidy” workshop on April 17. The workshop, limited to a very small group of experts in the sector, identified areas of concern and developed recommendations in the areas of environment and health, economics and energy with a particular focus on the issue of fuel subsidies in Egypt and their effect on the budget deficit.

The main objective of the workshop was to ascertain if there was a consensus for the gradual elimination of fuel subsidies in Egypt. A central concern was that the removal of fuel subsidies be implemented in such a way that adds to economic growth rather than create a parallel/dual-market economy. The main issues discussed were quantifying the subsidies, evaluating their cost and gains versus the losses of their removal, environmental impact, substitution of other energy resources and the need for an implementation strategy.

Removing subsidies can increase energy efficiency and the utilization of natural resources, it was noted. It can also reduce the budget deficit and improve the balance of trade. It was determined that positive externalities can improve the environment and quality of life. Meanwhile, the constraints and costs of subsidy removal are mostly socio-political unrest from low-income brackets, higher inflation and loss in competitive ability. There may also be some negative impacts on other strategic sectors such as electricity and transportation.

The foreseen challenges in applying subsidy removal are defining target groups needing compensation, shortage and/or reliability of market data, the role of the media, and the perceived or possible conflict of interest with government as an owner, producer and consumer of fuel.

At the conclusion of the workshop, the participants presented the following short- and medium-term recommendations: adjust existing laws and regulations to enforce substitution and improve utilization of fuel, initiate an awareness campaign on all levels (media, inter-governmental, private sector, citizens, etc.), develop a clear and transparent implementation strategy, private participation and public-private partnerships should be developed. In the long term, participants recommended defining and implementing an energy efficiency and replacement strategy.

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Subsidies in the Oil and Gas Sector: Problems and Solutions - December 5, 2004
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