|Egypt’s domestic production and consumption of petroleum products have increased to 92.4m tonnes in the fiscal year 2019-2020, compared to 89.7m tonnes in the fiscal year 2018-2019 / Photo by: Tungsten via Wikimedia Commons|
Egypt’s domestic production and consumption of petroleum products have increased to 92.4m tonnes in the fiscal year 2019-2020, compared to 89.7m tonnes in the fiscal year 2018-2019, reports daily Hellenic Shipping News Worldwide.
Increase in Consumption of Petroleum Products in Egypt
The country’s consumption of natural gas also increased from 48m tonnes to 51.1m tonnes this fiscal year. Citing a government source, the increase in petroleum production and gas consumption was attributed to the increasing needs of the electricity industry for gas and petroleum products, including jet fuel, diesel, and petrol. The increase in the consumption of petroleum products reached nearly 4% while the liquefied petroleum gas (LPG) cylinders consumption declined by nearly 2% caused by the expansion of providing natural gas to various residential units.
The Ministry of Petroleum Egypt, the Egyptian authority that supervises marketing, distribution, production, and exploration of oil, gas, and other natural resources, has also succeeded in lessening the deficit between consumption and domestic production of petrol by 3.8% during the present fiscal year. This brings the total production to 7.6m tonnes yearly compared to the 8m tons of petroleum and gas consumption.
|The country’s consumption of natural gas also increased from 48m tonnes to 51.1m tonnes this fiscal year / Photo by: Walaa via Wikimedia Commons|
Egypt has also started to export shipments of liquefied natural gas to other countries, such as Jordan. The source believes that the reason why there is an increase in the production of petroleum products in Egypt is because of the utilization of the capacities of refiners in Egypt. The importation of crude oil rather than derivatives also helped saved millions to the country’s state treasury.
As to the production of domestic diesel in Egypt, it is estimated to increase to about 14.7m tonnes yearly compared to the 16.8 tonnes consumption in the previous fiscal year, reducing the deficit to nearly 12.5%. Moreover, the rate of production of liquefied petroleum gas will increase to 2.6m tonnes annually compared to 3.9m tonnes of consumption. The domestic production of jet fuel also increased to 4.1m tonnes annually and consumption at about 670,000 tonnes.
Drop-In Oil Exports
The Ministry of Petroleum also revealed that although Egypt’s volume of oil exports increased by 2.1%, the value was dragged down because of the decrease in global oil prices. Its oil export in the first quarter of 2019-2020 FY stood at $2.42 billion compared to $2.87 billion a year ago.
Organization for Economic Co-operation and Development, an intergovernmental economic organization with 36 member countries founded to stimulate economic progress and world trade, has defined crude oil production as the quantities of oil extracted from the ground after removal of the impurities or inert matter. OECD details Egypt’s crude oil production in the following years:
2000 (35, 283.74 in thousand toe), 2001 (34, 202.71), 2002 (34, 048.28), 2003 (35, 040.92), 2004 (32, 705.13), 2005 (31, 571.27), 2006 (31, 303.04), 2007 (31, 101.62), 2008 (33,965.99), 2009 (33, 210.08), 2010 (33, 841.02), 2011 (33, 221.25), 2012 (33, 463.06), 2013 (33, 535.20), 2014 (34, 226.08), 2015 (33, 726.21), 2016 (33, 360.45), and 2017 (32, 087.40)
There are also other countries included in the OECD data based on their 2017 crude oil production. These countries include Russia with 525,084 thousand toe crude oil production, Norway 79,304, China 191,506, Saudi Arabia 507,805, United States 470,361, Iraq 228,213, and India 36,751, among others. Data from the IEA World Energy Statistics and Balances was included in determining the crude oil production of the said countries.
Just recently, the country had also signed a multimillion-dollar energy investment deal with Texas-based Noble Energy to pump natural gas through the East Mediterranean Gas Company’s pipeline. The US International Development Finance Corporation will provide the $430 million in insurance to help advance the energy security in Egypt by restoring its natural gas pipeline.
Oil Price and Economic Growth
Oil plays a significant role in the global economy. Its prices are determined by these two primary factors: (1) the supply and demand and (2) the market sentiment. The first factor is fairly straightforward, wherein as the demand increases the price will go up. The second factor refers to the overall attitude of the investors toward the market. Their belief that the oil demand will dramatically increase at some point in the future can increase oil prices as well.
According to the Federal Reserve Bank of San Francisco, higher oil prices have microeconomic implications. Since oil prices and gasoline prices are correlated, an increase in gasoline means there is less to spend on other goods and services. In businesses, higher oil prices mean that the production will be more expensive.
On a macroeconomic level, oil prices affect the prices of goods that are created using petroleum products. Indirectly, it affects costs such as heating, manufacturing, and transportation. High oil prices likewise reduce the demand for other goods sold in the market because it reduces wealth. The World Bank itself also mentioned that crude oil is a “critical driver of the world economy.”
As Egypt’s petroleum production and consumption increase, this also signifies a transfer of income from oil consumers to oil producers. There is a possibility that this will have both direct and indirect impacts on Egypt's financial market too as it can affect bond valuations, currency exchange rates, and equity.