Oil prices at pump soar in Lebanon after subsidy cut

BEIRUT: Lebanese wait in a queue outside a closed petrol station in Beirut’s Hamra district. Lebanon’s energy crisis is dragging people to unlikely places in their desperate quest for daily life’s essentials, be it fresh air, lighting, a working fridge or petrol for their cars. – AFP

BEIRUT: Lebanese fuel prices soared by up to 70 percent yesterday after yet another subsidy cut, official figures showed, heaping more pressure on people struggling to make ends meet in the cash-strapped country. The cost of hydrocarbon fuels in Lebanon has now roughly tripled in the two months since the central bank started decreasing its support for imports. The latest cut, which is expected to cause price hikes for other key commodities, comes as the Mediterranean country is mired in one of the world’s worst economic crises since the 1850s.

Dire shortages have seen Lebanon’s people struggle to find enough fuel to drive to work or power back-up generators during near round-the-clock electricity cuts. Motorists have become caught up in long lines outside the petrol stations that have remained open. The refusal of many petrol stations to sell what they do have saw the army deploy this month to seize hoarded fuel and distribute it to the needy. Frustrations have boiled over in recent weeks, with scuffles repeatedly breaking out over scarce fuel, leaving at least three people dead.

Last weekend the explosion of a fuel tank in the north of the country killed at least 30 people. The cost of 98- and 95-octane petrol rose yesterday by 67 and 66 percent, respectively, from August 11, according prices posted by the National News Agency. The cost of mazout, a widely used petrol derivative, soared by 73 percent over the same period. The price of a cooking gas canister shot up by more than 50 percent.

All three types of fuel cost roughly three times what they did on June 23. The increases come at a time when more than three-quarters of the population now lives in poverty. Most people in Lebanon earn wages in the local currency, the pound, which has lost more than 90 percent of its value against the US dollar on the black market since 2019.

The central bank on Saturday agreed to support fuel imports at an exchange rate of 8,000 pounds to the dollar, up from a rate of 3,900 to the greenback set during a first de facto subsidy decrease in June. Before that the Bank of Lebanon had provided importers with the foreign currency at the official rate of around 1,500 to the dollar. The central bank said earlier this month it could no longer afford to provide importers with dollars at any preferential rate, but leaders on Saturday reached a compromise with the 8,000 rate.

Meanwhile, Lebanese leaders agreed to a short-term compromise to maintain fuel subsidies Saturday, the presidency and prime minister’s office said, in a move set to trigger more price hikes. Widespread panic ensued, with distributors scaling back deliveries until new prices were announced and desperate motorists forming long queues outside petrol stations.

At a time when state electricity supply is almost non-existent, fuel oil has also been in short supply to run back-up generators to power homes, businesses and even hospitals. On Saturday evening, the presidency announced approval of a “request for the Bank of Lebanon to open a temporary account to cover urgent and exceptional subsidies for fuel”. A kitty of up to $225 million would be set aside to subsidise imports of petrol, fuel oil and cooking gas until the end of September, it said.

The decision was taken at a meeting attended by the president, the central bank chief and the caretaker prime minister, as well as the outgoing ministers of finance and energy. Lebanon’s currency, the Lebanese pound, remains officially pegged at 1,507 to the dollar, but it has lost more than 90 percent of its value on the black market.

The central bank previously provided fuel importers with dollars at an intermediate exchange rate of 3,900 pounds to the greenback, and fuel prices were fixed by the energy ministry based on this rate. The Bank of Lebanon would now ensure the ministry could set prices based on an exchange rate of 8,000 pounds to the dollar, the presidency and the prime minister’s office said, signalling a new increase in the price of petrol and fuel oil.

Threat of water shortages

Lebanese officials have blamed the fuel crisis on hoarding by distributors seeking to sell at higher prices, as well as smuggling to war-torn Syria. Lebanese economist Nassib Ghobril said the agreement was a “compromise” that sought to allow fuel importers to release more stock and reduce shortages. “But it will not solve the problem,” the chief economist at the Byblos Bank Group said. “The solution is to lift subsidies completely. That would lead to the disappearance of these long lines at the gas stations, and discourage smuggling,” he said.

In recent days, the army has forced filling stations hoarding petrol to sell it, and security forces have cracked down on smuggling. Saturday’s decision comes a week after a fuel tank blast killed more than 30 people clamouring for petrol in northern Lebanon. The prime minister’s office said it was also decided Saturday “to pay a month’s salary in two instalments to all public sector workers”, but gave no timeline for disbursement.

The UN children’s agency earlier warned power cuts were also impeding access to safe water. “More than four million people across Lebanon… face the prospect of critical water shortages or being completely cut off from safe water supply in the coming days,” UNICEF said in a statement. “UNICEF is calling for the urgent restoration of the power supply-the only solution to keep water services running.” The government stepped down a year ago after a massive blast in Beirut port that killed more than 214 people, but has stayed on in a caretaker capacity amid deadlock over a replacement line-up. – AFP

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