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The Natural Gas Sector in Post-Revolution Egypt

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  • Siddig, Khalid
  • Grethe, Harald

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.

Suggested Citation

  • Siddig, Khalid & Grethe, Harald, 2012. "The Natural Gas Sector in Post-Revolution Egypt," Conference papers 332190, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332190
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    File URL: https://ageconsearch.umn.edu/record/332190/files/5980.pdf
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    References listed on IDEAS

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    1. Soamiely Andriamananjara & Michael Ferrantino & Marinos Tsigas, 2005. "Alternative Approaches In Estimating The Economic Effects Of Non-Tariff Measures: Results From Newly Quantified Measures," World Scientific Book Chapters, in: Philippa Dee & Michael Ferrantino (ed.), Quantitative Methods For Assessing The Effects Of Non-Tariff Measures And Trade Facilitation, chapter 19, pages 525-540, World Scientific Publishing Co. Pte. Ltd..
    2. Malcolm, Gerard, 1998. "Adjusting Tax Rates In The Gtap Data Base," Technical Papers 28721, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Siddig, Khalid & Grethe, Harald, 2014. "No more gas from Egypt? Modeling offshore discoveries and import uncertainty of natural gas in Israel," Applied Energy, Elsevier, vol. 136(C), pages 312-324.
    4. Khalid H. A. Siddig, 2011. "From Bilateral Trade to Multilateral Pressure: A Scenario of European Union Relations with Sudan," Middle East Development Journal, Taylor & Francis Journals, vol. 3(1), pages 55-73, January.
    5. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
    6. Malcolm, Gerard, 1998. "Adjusting Tax Rates in the GTAP Data Base," GTAP Technical Papers 315, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    7. Shaffer, Brenda, 2011. "Israel--New natural gas producer in the Mediterranean," Energy Policy, Elsevier, vol. 39(9), pages 5379-5387, September.
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    Cited by:

    1. Ruble, Isabella, 2017. "European Union energy supply security: The benefits of natural gas imports from the Eastern Mediterranean," Energy Policy, Elsevier, vol. 105(C), pages 341-353.

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    More about this item

    Keywords

    Resource /Energy Economics and Policy; International Relations/Trade;

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D1 - Microeconomics - - Household Behavior
    • D3 - Microeconomics - - Distribution
    • D6 - Microeconomics - - Welfare Economics
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F1 - International Economics - - Trade
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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