Lebanon: Government raises oil prices again to cope with shortages | Business and Economy News

Beirut, Lebanon – Lebanon’s energy ministry on Friday again raised oil prices – this time by nearly 38% – as the country continues to cut fuel subsidies to deal with crippling shortages.

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

This equates to just over a quarter of the country’s minimum wage.

Friday’s oil price hike, one of the first steps taken by the new Lebanese government led by Prime Minister Najib Mikati, is one of many steps taken in recent months to reduce a crippling gasoline shortage and open up the way to the total elimination of subsidies.

Officials last month increased the price of octane fuel by 66%.

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

Lebanon must produce a credible economic reform plan in order to unlock billions of dollars in pledged aid from international donors and restart talks with the International Monetary Fund for a desperately needed bailout.

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

Oil prices and poverty

Lebanon’s economic crisis, which has plunged millions of people into poverty, worsened over the summer due to insufficient supplies of gasoline. Gas stations opened for limited hours and drivers lined up for hours to partially recharge their vehicles. Arguments between frustrated drivers have sometimes turned into violent and armed clashes.

But the pain at the pump should continue.

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

George Braks of the Service Station Owners Union told Al Jazeera that Lebanon is moving towards lifting all fuel subsidies by the end of the month.

“I hope we don’t move from one problem to another regardless of the new pricing mechanism adopted,” Braks told Al Jazeera.

He added that he hopes Lebanon’s central bank and energy officials implement a pricing mechanism that makes gasoline affordable for drivers and won’t hurt gas station owners.

“If they decide to price the dollar at the market rate, then this is something we would welcome, as we would continue with the Lebanese pound and not struggle to find US dollars.”

Fuel subsidies had enabled importers and distributors to sell fuel at an officially fixed rate of 1,500 Lebanese pounds to the US dollar. But as the value of the pound fell by around 90%, the fixed rate was replaced by an informal rate in the wider market. Economists and analysts say the continued subsidies ultimately prompted smuggling, especially in Syria, to sell at a profit.

The central bank announced in June that it would stop spending around $ 3 billion a year on diesel and gasoline subsidies, as it continues to dip into its dwindling foreign exchange reserves – which are currently at just under $ 13 billion. The announcement shook the economy and encouraged distributors to build up their inventory to sell later at higher rates. So far, diesel fuel subsidies have been officially lifted as power cuts plague homes, hospitals and businesses.

Laury Haytayan, oil and gas policy expert and general coordinator of the opposition Taqaddom party, worries about how global oil prices could affect the country when subsidies are lifted, especially since living conditions continue to deteriorate.

“All I can say is they are removing the subsidies now, so all we have to do is sit down and pray that world oil prices don’t go up… so that it doesn’t. not become a burden on us, ”Haytayan told Al. Jazeera.

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

Haytayan fears that if the price of gasoline is denominated in dollars after the removal of subsidies, there would be greater demand for gasoline distributed by Hezbollah and its network of institutions.

“I don’t know how the government would deal with this – having one product in Lebanese pounds and the other in dollars, one is smuggled and the other is legitimate,” Haytayan said. “Maybe then we will see a monopoly on the Iranian product… because it is valued in Lebanese pounds and reduced as we understood it from Nasrallah, and the rest are at market price. “

Source link

About Vicki Davis

Check Also

Latest Updates: US Services Growth Accelerates Despite Workforce Issues

PepsiCo increased its annual forecast for the second time in three months as resurgent demand …

Leave a Reply

Your email address will not be published. Required fields are marked *