Oil price surge to have deep impacts at home

The Russian-Ukrainian war has reshaped the map of the global economy.

It seriously impacted the oil sector, especially with governments around the world struggling to meet their energy needs and keep their country’s economies on the right track.

The European Union, along with the United States, are reportedly putting pressure on oil-producing nations, especially OPEC member states, who contribute almost 40 per cent of the world’s crude oil production, to increase output, with the aim of increasing supply and reining in prices.

The bloc agreed a few days ago to make an increase of 50 per cent in its output for the next two months. This will raise daily production by 648,000 barrels.

According to a number of international media outlets, the US and western consumers had stressed OPEC+ states to stir their production with the aim of neutralising around two thirds of Russian oil as planned by the EU.

However, some analysts do not expect such an increase to reach the desired equation.

JP Morgan, a US multinational investment bank, predicts the increase not offset growing demand at the peak seasons, and after the full reopening of great economies.

Brent crude oil had risen to over $123 a barrel, its highest level in two months, in response to sanctions imposed on Moscow, compared with $80 a barrel at the end of last year.

Local economists see these drastic changes coming with negative impacts on the Egyptian economy.

Goldman Sachs forecasts the barrel to hit $125 during the second half of 2022.

Meanwhile, the Egyptian budget for 2022/23 projects the price of the barrel at $80.

Consequently, Ministry of Finance officials said that each increase of one-dollar in the price of oil in the international market would raise the total budget deficit by one billion pounds (around $53 million).

Minister of Finance Mohamed Maeet told international business news network, CNBC, that keeping the barrel price at + $122 would cost Egypt around $7.2 billion every year.

In response, Egypt had signed $6-billion agreements with the International Islamic Trade Finance Corporation to finance the import of basic commodities, mainly wheat and oil.

According to the Ministry of Planning, these deals would secure credit facilities for the supply of grains and petroleum products.

According to local analysts, Egypt expects a $5-7 billion package from the International Monetary Fund (IMF) to support it economically in the face of pressures caused by the rise in global commodity prices.

Aya Zuhair, an analyst at Zilla Capital, said Egypt may receive from the IMF emergency financing packages worth $2.5 billion and $5 billion based on a plan to be agreed on.