The Impact of Energy Price Fluctuations on Food Security: Empirical Evidence from Egypt and KSA Using RCGE Model

Abstract

Oil prices have always been considered critical determinants of economic stability and food security in oil-dependent economies. Several studies have examined the existence, direction, strength, and predictability of the relationship between oil price and agricultural commodities. However, prior studies have not explicitly examined the interlinkages between oil prices and food security at both macroeconomic and microeconomic levels, particularly for Egypt and Saudi Arabia, which differ fundamentally as a net oil-importing and a major oil-exporting economy, respectively. This study employs a multi-sectoral, multi-country regional computable general equilibrium model specifically designed to simulate the effects of global oil and natural gas price increases in both Egypt and Saudi Arabia. The results reveal marked asymmetries in the magnitude and direction of impacts across the two countries. Egypt is negatively affected by its status as a net importer of petroleum products, leading to an increase in costs and adversely affecting the overall economy. In contrast, Saudi Arabia experiences net positive macroeconomic effects, benefiting from increased oil revenues as an exporting country. Overall, the gains realized by Saudi Arabia substantially exceed the losses incurred by Egypt, underscoring the differences between the exporting and importing countries. Therefore, this study recommends that policymakers respond swiftly and effectively to limit volatility in agricultural production and food prices and to safeguard food security outcomes. Moreover, the study highlights avenues for future research, including the role of renewable energy transitions and subsidy reforms, to further enhance the policy relevance of energy–food security analyses.