On December 28th, 2024, the ElAdl Party hosted a roundtable discussion titled “The Impact of Energy Prices on the Egyptian Economy,” in which it provided a platform for conferring about the Egyptian energy sector and its effect on economy.
The event brought together a distinguished group of experts and specialists in energy, economics, and legislation. Participants included Mohamed Fouad, CEO of Egypt Oil & Gas and Secretary General of the Egyptian Gas Association (EGA); Yossra Asaker, Senior Energy Specialist at the World Bank; Ayman Heiba, Head of the Sustainable Energy Division at the Cairo Chamber of Commerce; Alaa Kamal, CEO of INP Egypt and Vice President of the German-Arab Chamber of Industry and Commerce; Medhat Nafie, Economic Expert; Samir Al Kareish, Former Director of Technical Affairs at the Organization of Arab Petroleum Exporting Countries (OAPEC); Khaled Naguib, Chairman of the Board of Directors of Hydrogen Egypt; Osama Fouzi, Founder and Chairman of the Executive Council of the Hydrogen H2lligence Platform; Mustafa Sharbini, Ambassador of the European Climate Pact and Head of the COP29 Observer Delegation; and Haitham Al-Saeed, Member of the Central Energy Affairs Bureau at the Future of Egypt Party.
The roundtable focused on three key axes, including the impact of energy prices on the Egyptian economy by studying the repercussions of rising prices on various sectors such as industry, transportation, and housing and their impact on inflation rates; the role of legislation in managing energy resources, including attracting renewable energy investments; as well as Egypt’s energy transition strategies, emphasizing green hydrogen, renewable energy, and supporting infrastructure.
It was moderated by MP Ahmed Qanawi, a member of the Senate and Secretary-General of the ElAdl Party, along with Mohamed Attia, Secretary of the Production and Logistics Policies Unit of the ElAdl Party.
Energy Prices Impacting Economy
In the first axis, the discussion centered on the reality of energy prices in Egypt and their economic impact. Participants analyzed price trends at both local and global levels, emphasizing the role of supply and demand in shaping them.
The dialogue explored the implications of energy prices on various economic sectors, including industry, agriculture, and services, and their influence on production and costs. Additionally, the impact of energy prices on local market inflation and mechanisms to mitigate these effects were discussed. The conversation also highlighted energy prices as a critical factor in either attracting or deterring investments and their direct impact on economic growth.
In this regard, Nafie confirmed that the economic slowdown has begun to appear noticeably as a result of the significant increase in interest rates, which seek to catch up with runaway inflation rates. Nafie pointed out the crucial role that energy plays in determining the prices of other commodities, whether these products are used as inputs for production, as a source of energy for transportation and storage, or at all stages of the production process until they reach the consumer. All of this has a direct impact on prices, and thus on inflation rates.
Meanwhile, Asaker stated that the relationship between the economy and energy faces major challenges. For example, in 2018-19, before subsidy cuts, we were close to achieving a complete subsidy removal, but external shocks brought us back to square one. We must not forget that the consumer is now paying 50% to 70% more than he was paying in 2019, but with the liberalization of the currency price, the citizen actually bears between 50% and 60% of what he was paying previously.
Energy Subsidies Impacting Prices
The second axis focused on the repercussions of rising energy prices on the state’s general budget and the legislative and political role in managing it. The pressure from the energy import bill and increased spending on subsidies and their impact on government spending priorities were highlighted, as the budget shifts from development projects to covering energy costs.
The role of specialized parliamentary committees in studying the repercussions of rising prices and proposing sustainable solutions was also reviewed, with emphasis on the importance of transparency in setting pricing policies.
The discussion also emphasized the importance of mitigating the negative impacts on the most vulnerable groups. It highlighted the role of taxation and legislative mechanisms in promoting the transition to renewable energy and reducing emissions.
The energy market, like any other market, is affected by multiple factors, as countries’ development plans are affected by economic and geopolitical factors, such as the slowdown in economic growth in China and the impact of geopolitical events on demand and global oil and gas prices, according to Heiba.
Nafie added that there are two main factors that permanently determine the fluctuations in energy prices. The first factor is subsidies, which amounted to about 154 billion pounds in the last budget. Going on, Nafie explained that this amount cannot be described as full support unless weaknesses in production efficiency, energy distribution and intermediate processes are addressed. These improvements require a competitive market free of monopoly, while reducing current waste, such as the inefficiency of partnership contracts with foreign parties, and the lack of hedging contracts that help mitigate price fluctuations.
Challenges Facing Egypt’s Sustainable Energy Strategy
In the third axis, the spotlight was on Egypt’s Sustainable Energy Strategy 2035 and its role in meeting the increasing demand for energy in conjunction with population growth.
Participants discussed the feasibility of plans to increase the share of renewable energy to 40% by 2030, and the challenges associated with developing the infrastructure and enhancing the investments needed to achieve this goal. Green hydrogen projects were also focused on as a strategic step towards achieving a more diverse and sustainable energy mix, while emphasizing the importance of international partnerships and modern technologies in supporting Egypt’s ability to become a regional hub for the production and export of green hydrogen.
Hafez El-Salmawy, Professor of Energy Engineering and former executive chairman of the Egyptian Electric Utility and Consumer Protection Regulatory Agency, stated that while Egypt’s oil and gas resources are at an average level by international standards, these resources are insufficient to meet the country’s growth rates.
El-Salmawy emphasized the significance of energy transition as part of Egypt’s vision, advocating for increased reliance on electricity and renewable energy while reducing dependence on oil and gas. He added that despite decreasing oil consumption, refining capacity of 38 million tons per year will enable Egypt to import crude, refine it locally, and sell it in foreign markets.
Meanwhile, Samir Al Kareish explained that Egypt is leading the countries in the hydrogen file, but there are changes in the gas file after the launch of the low-carbon hydrogen strategy. Al-Quraishi pointed out that Germany has allocated billions of dollars for research in this sector, and Egypt has signed a cooperation protocol with them. Additionally, Al Kareish called for the need to benefit from this cooperation through exchanging expertise and building capacities to maximize mutual benefits in this field.
Energy Efficiency and Sustainability
The discussion further tackled ways to enhance the energy sector efficiency and sustainability. Fouad stated that “Egypt’s energy sector holds great potential, but it requires proactive measures, clear investment incentives, and a secure, attractive environment to ensure sustainable growth.” He further elaborated, emphasizing that “a strategic approach to managing foreign currency shortages, stabilizing financial policies, and ensuring consistent regulations is crucial for enhancing the Egyptian market’s credibility.” Additionally, Fouad stressed the need to ensure the timely settlement of obligations to foreign partners and revisit investment agreements to build trust, encourage new investments, and boost production.
Additionally, Fouad assured the importance of addressing foreign currency shortages, stabilizing financial policies, and ensuring a predictable regulatory framework to boost market credibility. He called for proactive strategies, clear investment incentives, and a secure business environment to unlock the sector’s potential and drive sustainable growth.
Meanwhile, Attia said that “Egypt’s problems are not technical, we have distinguished skills and cadres. We have demanded that the Ministries of Electricity and Petroleum be under one administration to avoid conflict between ministries. Our main problem lies in management and organization, not in technical aspects.”
Abdelrahman Gabr, Key Account Manager at Orcan Energy Company, agreed, stating that there is great potential for energy efficiency by generating clean electricity by using less fuel in the petroleum industry process.
Meanwhile, Asaker emphasized that significant investments are required to advance exploration and renewable energy, with an active role for the private sector. However, she noted that the private sector would only participate if there is a clear future vision outlining how funds will flow in and out, currency stability, supportive policies, incentives, and the state’s role in building confidence. She stressed the importance of having a well-defined vision with a specific timeline and the prompt issuance of executive regulations.
On the other hand, Heiba noted that the Egyptian government is working to enhance energy security, as it was the first to establish gas liquefaction stations and new explorations, in addition to its prominent role in the East Mediterranean Gas Forum and the demarcation of maritime borders. Heiba also added that the energy transition policy that began in 2014 aims to increase reliance on renewable energy and convert cars to run on natural gas, which in turn affects energy prices.
The roundtable discussion provided a valuable platform for experts and stakeholders to delve into the critical challenges and opportunities facing Egypt’s energy sector. Key takeaways include the urgent need to address the economic impact of rising energy prices, the crucial role of legislative reforms in attracting renewable energy investments, and the importance of a comprehensive energy transition strategy.