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Beirut, Lebanon- Lebanon’s Ministry of Energy raised gasoline prices again on Friday — this time by nearly 38% — as the country continued to cut fuel subsidies to address severe shortages.
According to an official document signed by the newly appointed Minister of Energy, Walid Fayyad, the price of 20 liters of 95-octane and 98-octane gasoline rose to 174,300 ($11.24) and 180,000 (11.64), respectively. US dollar) Lebanese pound.
This is equivalent to a little more than a quarter of the country’s minimum wage.
Friday’s increase in gasoline prices is one of the first initiatives of the new Lebanese government under the leadership of Lebanese Prime Minister Najib Mikati. One of the measures to level the road.
Last month, the authorities increased the price of 95-octane fuel by 66%.
Mikati once stated that the elimination of fuel subsidies is a key step to get the country out of the economic crisis, and the World Bank has listed it as the world’s three major crises in the past 150 years.
Lebanon must develop a reliable blueprint for economic reforms to release billions of dollars in pledged international donor assistance, and initiate negotiations with the International Monetary Fund to seek urgently needed assistance.
On Friday, Finance Minister Youssef Khalil signed a contract with Alvarez & Marsal to conduct a forensic audit of the country’s central bank-a key prerequisite for unlocking international aid.
Gas prices and poverty
Due to insufficient gasoline supplies, Lebanon’s economic crisis plunged millions of people into poverty, which worsened in the summer. Gas stations have limited operating hours, and drivers will queue for several hours at a time to fill up their vehicles. Quarrels between frustrated drivers sometimes turn into violence and armed confrontation.
But the pain of the pump is expected to continue.
A man sits in a car while waiting for refueling at a gas station in Beirut, Lebanon [File: Mohamed Azakir/Reuters]George Braks of the Gas Station Owners Association told Al Jazeera that Lebanon will abolish all fuel subsidies by the end of this month.
“Hopefully, no matter what new pricing mechanism is adopted, we will not move from one problem to a new problem,” Brax told Al Jazeera.
He added that he hopes that the Lebanese Central Bank and energy officials will implement a pricing mechanism that will enable drivers to afford gasoline without harming gas station owners.
“If they decide to set a price in U.S. dollars at market prices, then we will welcome this approach because we will continue to use Lebanese pounds instead of trying to find U.S. dollars.”
The fuel subsidy allows importers and distributors to sell fuel at the official fixed exchange rate of 1,500 Lebanese pounds to the U.S. dollar. But as the value of the pound plummeted by about 90%, the fixed exchange rate was replaced by the informal exchange rate in the broader market. Economists and analysts say that retaining subsidies will eventually stimulate smuggling, especially into Syria, for profitable sales.
The central bank announced in June that it would stop using approximately US$3 billion in subsidies for diesel and gasoline each year because it continues to use its declining foreign exchange reserves-currently only slightly less than US$13 billion. The announcement caused a shock throughout the economy and encouraged distributors to hoard inventory so that they could sell it at a higher price in the future. So far, diesel subsidies have been officially cancelled because of power outages plagued families, hospitals and businesses.
Lary Haytayan, the gas and oil policy expert and general coordinator of the opposition Taqaddom, is concerned about how global oil prices might affect the country after subsidies are removed, especially as living conditions continue to deteriorate.
“I can only say that they are removing subsidies now, and then all we need to do is sit down and pray that global oil prices will not rise…so it will not become a burden on us,” Haytayan told Al Al Jazeera.
Iran-backed Hezbollah shipped the first batch of diesel from Tehran on Thursday, which will be donated to some institutions and sold to others at a discount in local currency. It is one of four fuel vessels expected to dock in Syria and ship to Lebanon. Hezbollah Secretary-General Hassan Nasrallah said on Monday that the third ship, which is expected to arrive sometime next month, will contain gasoline.
Haytayan worries that if gasoline is priced in U.S. dollars after the subsidy is eliminated, the demand for gasoline by Hezbollah and its network of institutions will increase.
“I don’t know how the government will deal with this problem-one product is Lebanese pounds, the other is U.S. dollars, one is smuggled, and the other is legal,” Haytayan said. “Maybe next we will see the monopoly of Iranian products…because it is priced in Lebanese pounds and discounted as we understand from Nasrallah, while other products are at market prices.”
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