Recent Fuel Price Increase: Does It Break Automatic Pricing Rules?

On 18 October, the government raised the prices of motor vehicles’ gasoline, diesel oil and natural gas, and industrial mazut. The increase was decided by the Fuel Automatic Pricing Committee. The Minister of Petroleum and Mineral Resources issued three decisions for the increase.[1] This price change is the eighteenth in a chain, mostly of increases, since the implementation of the automatic pricing mechanism for all petroleum products in July 2019. It marks the third increase this year. The Committee announced the prices will remain unchanged for six months. It stated that the increase, which affects all types of widely used fuel, aims to narrow the gap between the prices and the cost production and export.[2]

Increases and Rates

Pricing Committee’s Work Bases

In December 2018, the Prime Minister issued a decree forming a technical committee named “Committee for Monitoring Automatic Pricing Mechanism for Petroleum Products.” The Committee includes representatives from the Ministry of Petroleum, the Ministry of Finance and the Egyptian General Petroleum Corporation. It is tasked with monitoring the pricing formula on a quarterly basis. Its initial mission was limited to linking the price of 95-octane gasoline to the global prices of Brent crude and the exchange rate, taking into account other costs that can be adjusted non-periodically. The decree required the Committee to monitor the implementation of the pricing mechanism, provide recommendations and proposals as necessary to ensure the proper implementation of the mechanism, and solve problems, shortcomings and gaps that arise during the actual implementation of new prices.[3]

In July 2019, the Prime Minister issued another decree expanding the scope of the Committee. Thus, the Committee was tasked with monitoring, on a quarterly basis, the pricing formula for the selling prices of petroleum products other than butane and petroleum products used in the electricity and bakery sectors. The pricing formula was to be updated upward or downward according to the increases and decreases in the average price of Brent crude and the exchange rate, taking into account other costs.[4]

Accordingly, the price was adjusted two times in 2019, four times in 2020, four times in 2021, three times in 2022, two times in 2023 and three times in 2024.

Suspected Violation of Pricing Rules

The 2019 Prime Ministerial Decree is the sole regulatory reference and basis for gasoline, diesel and natural gas price increase decisions. The Decree has set the rate of the maximum upward or downward quarterly adjustment at 10% of the selling price.

The recent decisions and increase rates have only adhered to the increase limits for natural gas. As for the rest of fuel types, the increases reached record levels, exceeding 17% for diesel, which directly impacts the prices of all goods.

[1] Minister of Petroleum and Mineral Resources Decisions 1760, 1761 and 1762/2024, Egyptian Gazette, Issue 229 (Supplement), 17 October 2024.

[2] Fuel Automatic Pricing Committee’s statement issued by the Ministry of Petroleum and Mineral Resources on 18 October 2024.

[3] Prime Ministerial Decree No. 2764/2018.

[4] Prime Ministerial Decree No. 1558/2019.