Oil played a major part in Egypt's balance of payments. For many years, it was the most important source of foreign exchange for the government and the second most important, after workers' remittances, for the economy as a whole. In addition, other exogenous sources, remittances, and Suez Canal revenues were directly and indirectly influenced by petroleum production. Its significance as a generator of foreign exchange first emerged in the 1970s. With the rise of oil prices in the world market in 1974, Egypt began to pump greater quantities of oil. Oil prices continued to increase between 1974 and 1980, when they reached about US$38 per barrel. They began to fall after 1980 until they crashed to about US$12 in 1986 but made a slight recovery after that date.
Crude oil production increased more than five-fold between 1974 and 1984, from 7.5 million tons to 38.5 million tons. Some of the increase was absorbed by domestic consumption, while the rest was exported. Crude oil exports tripled between 1976 and the first half of the 1980s. The index dropped to 70 in 1986 as the government sought to counter the decline in prices by reducing supply, hoping that the price would quickly rebound. Output was restored to previous levels in 1987. In 1988 the index fell once more to 68.
The export value of oil by domestic companies followed the trajectory of both prices and production. At current prices, it peaked in 1984 at about US$3 billion, dropped to about US$1.4 billion in 1986, and rose to about US$1.6 billion in 1988. These figures represented the Egyptian share, not that of foreign companies (the latter appeared on the credit side in export transactions, then as outflows on the debit side in net factor income entries, summing up to zero in the total current account balance).
Experts pointed out that not only were petroleum revenues unpredictable but oil was depletable. They predicted depletion could occur within twenty to thirty years or somewhat later if natural gas, which was in some respects an oil substitute, were taken into account. The exportable surplus of hydrocarbons, however, would end long before the supply was exhausted.
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