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Cause and effect

Reader comment on item: Fixing Egypt's Economy: No More Military Macaroni
in response to reader comment: US politics helped induce Egyptian Upheaval

Submitted by Randall P. (United States), Aug 2, 2013 at 20:36

While most of your facts are correct, your conclusion stops too short and overlooks other causes and their effects. OPEC pricing policies and the wasteful use of oil income is one of the root causes of today's problems.

An example of wasteful expenses are the many billions of dollars each year that oil producers and other Arab countries give away. Fuel subsidies alone account for the bulk of energy subsidies consumption. In Egypt, the most populous Arab country, energy subsidies amount to about $25 billion a year, 30 percent of total government spending, and over 10 percent of GDP. The IMF estimates that in 2011, Arab governments spent about $240 billion in energy subsidies alone and tells those governments to reduce wasteful expenditures. Then add in the cost of food subsidies in Egypt alone.

Ethanol production will follow the price of oil upward. As oil gets priced higher by wasteful OPEC governments, ethanol production increases and drives food prices higher. There would be no ethanol production and much more food exported at low prices if OPEC lowers the price of oil by cutting back on their welfare policies. The problems started with higher oil prices, not by companies running ethanol plants.

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