A study of the impact of the Egyptian petroleum sector on the Egyptian economy, 1962-1982.

The main objective of this thesis is to estimate and evaluate the impact of the Egyptian petroleum sector on the Egyptian economy during the period 1962-1982 within both micro and macro-economic approaches. On the basis of the empirical findings of the study, the oil sector comes out fairly well as a good leading sector in the Egyptian economy. The study has also revealed that the domestic consumption of oil has dramatically increased at a high rate of growth as well as the oil production/reserves ratio is relatively high in Egypt comparing to a country which has a huge amount of oil reserves. Considering the above three facts, Egypt can face the following problems: 1) The uncertainty of oil discovery and 2) The gains in the terms of trade are limited due to the decrease or the slight increase in oil prices. In this case, it can be anticipated not only the impact of the oil sector to fall but also Egypt can be expected to be a net oil importer in the very near future. Therefore, the study has investigated both oil demand and oil supply sides in Egypt in order to determine the main factors which affect them and which in turn affect the role of the oil sector in the economy in an attempt to reach some policy recommendations which might help policy makers in planning and controlling petroleum activities in Egypt in such a way that their contributions can be maximized. On the basis of such investigation, it has been concluded that reconsidering the domestic pricing policy of oil in Egypt is very crucial in order to decrease and rationalize domestic oil consumption in particular the analysis of the subsidy system of petroleum products in Egypt has revealed that the system has not achieved its main goals. Examining the main determinants of oil supply in Egypt, it seems very important to intensify investment in oil exploration activities in order to secure and increase oil reserves and which in turn lead to secure oil supply. Also, it seems reasonable that the relatively optimal policy of oil production in a country at a stage of rebuilding and developing her economy such as Egypt is that policy which produces on a level sufficient to be exchanged for a financial resource and which in turn could be invested in capital formation and thus developing the basic productive sectors. Such policy is thus taking account of future generations by directing oil revenues to future welfare through investment channels.