The Natural Gas Sector in Post-Revolution Egypt

Khalid Siddig and Harald Grethe

No 332190, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: This paper assesses the economic implications of a situation in which Egypt increases the price of its gas exports to Israel to equalize the world price. This is motivated by the Egyptian revolution that toppled a government which was offering Israel preferential prices. The public discontent about the preferential treatment of Israel was recently reflected in several attacks on the pipelines that transfer the gas. Moreover, the paper also assesses the impacts of terminating the agreement in light of the April 2012 announcement of the Egyptian Natural Gas Holding Company of the termination of its contract to ship gas to Israel. A reduction of the deviation of export prices to Israel from the average world prices is simulated with the GTAP model and based on an updated version of the GTAP database that reflects the actual natural gas production, trade shares and cost structures in both countries. Results reveal that the Egyptian economy will enjoy welfare benefits from the abolishment of preferential treatment of Israel. However, the overall gas production in Egypt would decrease due to the removal of subsidized exports to Israel and supply to the domestic market as well as other destinations would increase after shrinking exports to Israel. The overall welfare gains would be driven by increases in export prices for gas that, despite the reduction in export volume, generate higher export revenues. The GDP would grow geared by the increasing returns to production factors especially in sectors with a high input share of gas such as the electricity; chemical, rubber and plastic products, and service sectors.

Keywords: Resource/Energy Economics and Policy; International Relations/Trade (search for similar items in EconPapers)
Pages: 33
Date: 2012
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Journal Article: The natural gas sector in post-revolution Egypt (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:332190

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