Lebanon: government raises petrol prices again to tackle shortages | Business and economic news

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Lebanon: government raises petrol prices again to tackle shortages |  Business and economic news


Beirut, Lebanon – The Lebanese Ministry of Energy on Friday raised gasoline prices again — this time by nearly 38 percent — as the country continues to roll back fuel subsidies to address crippling shortages.

According to an official document signed by newly installed Energy Minister Walid Fayyad, the price of 20 liters of 95-octane and 98-octane gasoline has risen to 174,300 ($11.24) and 180,000 ($11.64) Lebanese pounds, respectively.

That corresponds to just over a quarter of the country’s minimum wage.

Friday’s gasoline price hike, one of the first steps taken by the new Lebanese government under Prime Minister Najib Mikati, is one of many in recent months to reduce a crippling gasoline shortage and pave the way for the complete abolition of subsidies.

Last month, authorities increased the price of 95-octane fuel by 66 percent.

Mikati has said the lifting of fuel subsidies is a critical step in lifting the country out of an economic crisis that the World Bank has ranked among the three worst in the world over the past 150 years.

Lebanon must create a credible blueprint for economic reform to mobilize billions of dollars in pledged international donor assistance and initiate negotiations with the International Monetary Fund for a much-needed bailout.

On Friday, Finance Minister Youssef Khalil signed a contract with Alvarez & Marsal to conduct a forensic audit at the country’s central bank – also a key prerequisite for unlocking international aid.

Gasoline prices and poverty

Lebanon’s economic crisis, which has pushed millions into poverty, was exacerbated over the summer by insufficient gas supplies. Gas stations only opened for a limited number of hours and drivers queued for hours at a time to partially refill their vehicles. Arguments between frustrated drivers sometimes resulted in violent and armed clashes.

But the pain at the pumps is expected to continue.

A man rests in his car while waiting for fuel at a gas station in Beirut, Lebanon [File: Mohamed Azakir/Reuters]

George Braks of the Petrol Station Owners’ Syndicate told Al Jazeera that Lebanon is on track to end all fuel subsidies by the end of the month.

“Hopefully we don’t go from one problem to a new problem with whatever new pricing mechanism is adopted,” Braks told Al Jazeera.

He added that he hopes Lebanon’s central bank and energy officials introduce a pricing mechanism that will make gasoline affordable for drivers and not harm gas station owners.

“If they decide to price the dollar at the market rate, we would welcome that because we would continue with the Lebanese pound and not struggle to find US dollars.”

Fuel subsidies allowed importers and distributors to sell fuel at an officially pegged rate of 1,500 Lebanese pounds to the US dollar. But when the value of the pound plunged about 90 percent, the pegged rate was replaced by an informal rate in the broader market. Economists and analysts say keeping the subsidies ultimately smuggled, particularly to Syria, to sell for a profit.

The central bank announced in June that it would stop spending about $3 billion annually on diesel and gasoline subsidies as it continues to dive into its dwindling foreign exchange reserves — which currently stand at just $13 billion. The announcement shocked the economy and encouraged distributors to stockpile up their stocks to later sell at higher rates. So far, diesel fuel subsidies have been officially lifted as power cuts plague homes, hospitals and businesses.

Laury Haytayan, a gas and oil policy expert and general coordinator of opposition party Taqaddom, is concerned about the impact of global oil prices on the country if subsidies are lifted, especially as living conditions continue to deteriorate.

“All I can say is that they’re abolishing the subsidies now, then all we have to do is pray that global oil prices don’t go up…so it doesn’t become a burden for us,” Haytayan told Al Jazeera.

Iran-backed Hezbollah delivered the first shipment of diesel fuel from Tehran on Thursday, which will be donated to some institutions and sold to others at a discounted price in the local currency. It was one of four ships with fuel expected to dock in Syria and be delivered to Lebanon. Hezbollah Secretary General Hassan Nasrallah said Monday that the third ship, expected to arrive sometime next month, would contain gasoline.

Haytayan fears that if gasoline is priced in dollars after subsidies are lifted, there would be greater demand for the gasoline distributed by Hezbollah and its web of institutions.

“I don’t know how the government would ensure that – if one product is in Lebanese pounds and the other in dollars, one is smuggled and the other is legitimate,” Haytayan said. “Maybe next time we will see a monopoly on the Iranian product… because it is priced in Lebanese pounds and discounted as we understood from Nasrallah, and the others are in the market price.”

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