Iran war drives Egypt’s energy bill higher amid surging import costs

The Egyptian economy is currently grappling with mounting pressure from an annual energy bill approaching $20bn, as global geopolitical tensions driven by the US-Israeli strikes on Iran and domestic production challenges complicate efforts to secure sustainable energy supplies, Masrway reported on March 23. 

President Abdel Fattah El-Sisi said the country consumes petroleum products worth nearly $20bn annually, with the bulk used for electricity generation rather than transport. He warned that passing on full costs to consumers could quadruple electricity prices, pointing out that the scale of the implicit subsidies borne by the state. 

The challenge is intensifying amid global energy market disruptions linked to regional conflicts, particularly in the Middle East and the Iran war. The Strait of Hormuz, through which around 20% of global oil and gas supplies pass, has become a key energy concern, with shipping delays and higher insurance costs driving up prices.

In response to escalating tensions in the region, Egypt has introduced emergency measures to curb energy consumption amid rising global fuel and gas prices. The country raised fuel prices by up to EGP 3 per litre and announced temporary measures to reduce electricity demand.

In addition, the Egyptian government’s measures included cutting street lighting, switching off roadside advertising lights and enforcing early closing hours for shops, malls and restaurants. Authorities are also considering remote working arrangements to ease power consumption, according to Al Hurra.

Domestically, Egypt has shifted from gas self-sufficiency to a supply gap, as production fell from around 7.2bn cubic feet per day to 4.1bn, leaving a shortfall of more than 2bn cubic feet that must be covered by imports. The shortfall is partly offset by gas imports, including supplies from Israel, which can reach 1.1bn cubic feet per day but are vulnerable to disruptions during the regional conflict.

PM Mostafa Madbouly recently revealed that Egypt’s monthly gas import bill has jumped from $560mn to around $1.65bn. 

Therefore, boosting local gas production is critical for Egypt, alongside expanding exploration, deploying advanced drilling technologies and unlocking unconventional resources such as shale gas. At the same time, the government is accelerating its transition towards renewable energy, targeting a 42% share in the energy mix by 2030.

Egypt’s ability to contain its energy bill will depend on restoring production and navigating ongoing global volatility. The Iran war demonstrated that Egypt's reliance on volatile spot markets and imported gas exposes it to price shocks. The need to boost domestic production and diversify energy sources is now critical to ensure long-term energy security.