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Fuel Shortages

Renewed fears of de facto end to subsidies as fuel prices are hiked

Renewed fears of de facto end to subsidies as fuel prices are hiked

A 40 percent fuel price hike on Friday has renewed fears of a de facto end to BDL subsidies. (Credit: João Sousa/L’Orient Today)

BEIRUT — The government came one step closer to ending fuel subsidies on Friday, with the Energy Ministry releasing an updated list of prices that are nearly 40 percent higher than the next-most recent prices, issued on Sept. 8.

The new price hike brings the cost of 20 liters of 95-octane gasoline to LL174,300 and 98-octane gasoline to LL180,000.

The move is the latest in a series of price hikes corresponding with a series of subsidy cuts dating back to June. In August the government declared that the subsidy program funded out of Banque du Liban’s foreign currency reserves would terminate at the end of September, but rumors of an early, unannounced end to subsidies have circulated in recent weeks. Reports last Tuesday that BDL was not selling importers US dollars for new oil shipments caused some to speculate that subsidies had de facto ended ahead of a formal announcement.

Throughout the country’s two-year economic crisis, fuel importers have been able to trade their lira for dollars with BDL at a preferential rate, with price controls at the pump working to pass those savings on to consumers. In June the exchange rate for importers more than doubled, from LL1,500 to LL3,900. In August the rate doubled again, to LL8,000, pushing 20 liters of 95-octane gasoline to its previous record high of LL129,000.

Rumors that the subsidies had prematurely come to an end were revived on Friday as the ministry’s new price list, coinciding with an appreciation in the lira’s value, lended the appearance that the new prices are possibly unsubsidized, market rates.

George Fayad, the head of the fuel importers syndicate, confirmed to L’Orient Today that fuel importers are receiving dollars at LL12,000, which constitutes a small subsidy given the lira’s valuation at LL15,000 to the US dollar on the parallel market as of early evening.

Today’s price for 20 liters of gasoline on international markets is around $16, he said. At the current exchange rate, that would equal approximately LL240,000, some LL65,000 more than the current selling price in Lebanon.

A BDL spokesperson said the funding for the subsidy is still part of the $225 million allocation decided upon by the caretaker cabinet in August. The spokesperson said they did not know why the subsidy rate was changed from LL8,000 to LL12,000, and the Energy Ministry did not respond to a request for comment.

Speaking with Reuters, George Brax, a member of the gas station owners syndicate, called today’s increase the last stage before the complete lifting of the subsidy. “The subsidy on fuel I imagine from now till the end of the month will go to the last stage and be lifted completely, and all fuel will then be nonsubsidized,” he said.

For the time being, customers should expect long lines to continue to disrupt traffic and make buying gas difficult and time-consuming. The unloading of seven ships this week after rumored delays — three ships carrying diesel and four gasoline — may boost local supply in the short run. On Tuesday, Medco’s vice president, Maroun Chammas, told L’Orient-Le Jour fuel from the seven ships will last up to 15 days. When asked Friday whether customers could expect lines to become shorter, Chammas responded “I wish.”

Fayad said the lines will end only when the subsidy is fully removed “and importation exceeds the demand.” In the meantime they expect today’s price increase to reduce the demand for gasoline, he added.


BEIRUT — The government came one step closer to ending fuel subsidies on Friday, with the Energy Ministry releasing an updated list of prices that are nearly 40 percent higher than the next-most recent prices, issued on Sept. 8.The new price hike brings the cost of 20 liters of 95-octane gasoline to LL174,300 and 98-octane gasoline to LL180,000. The move is the latest in a series of price...