By reducing subsidies on fuel and electricity, President Sisi is taking a huge political risk. But the measure is necessary to revive Egypt’s upstream sector.

Egypt’s new President Abdel Fatah al-Sisi broke one of the region’s biggest political taboos last weekend, when the fuel price increases he had decreed came into effect.

The bold move sparked outrage in Egypt, where a quarter of the population lives below the poverty line, and subsidies on energy and basic...