BEIRUT — Banque du Liban lifted the last remaining portion of the gasoline subsidy on Monday after having gradually reduced it over the past month, Georges Brax, the spokesperson for the Gas Station Owners’ Union told L'Orient Today.
This decision had been expected since last week, according to Brax and the D-Day, as Brax called it, has arrived this morning with the new fuel prices released by the Energy Ministry, which are as follows: 20 liters of 95-octane and 98-octane gasoline increased by LL20,000, reaching LL638,000 and LL653,000, respectively. Twenty liters of diesel now cost LL790,000, down LL1,000. A cylinder of household gas now costs LL350,000, up LL2,000.
Until Monday, payments for imports were made by paying 20 percent at BDL's subsidized Sayrafa rate (LL28,200 to the dollar on Monday) and the remainder at the parallel market rate (around LL35,200 to the dollar). As of today, those payments are 100 percent unsubsidized.
While the lira has been depreciating steadily since late 2019 (which stood at LL35,000 to the dollar as of Monday in the parallel market, a depreciation of more than 95 percent from the official rate of LL1,507.5), BDL guaranteed a ratio of dollars on gasoline importers' bills. This rate subsidy mechanism has evolved numerous times since its launch in Oct. 2019. In its last version, BDL agreed to provide these dollars at the rate of its Sayrafa platform, with the lira below the parallel market rate, in charge of importers to provide the rest in dollars purchased from legal brokers and the open market. The Ministry had been setting prices taking into account these factors in addition to the price of fuel.
However, following the fuel subsidies lift on Monday, Brax told L'Orient Today that fuel prices in Lebanon will be calculated at the parallel market exchange rate from now on and will no longer be affected by the Sayrafa rate.
The ratio of subsidized dollars rose to 100 percent in March, but fell to 85 percent in July and then to 70 percent in mid-August when it began to be reduced on a weekly basis: 55 percent the week of Aug. 22, 40 percent the week after, and 20 percent last week.
Since mid-August, the price of 20 liters of gasoline (95 and 98-octane) has risen by less than LL100,000 and remains at around LL640,000, below the LL700,000 mark reached in June during the peak of world oil prices (more than $120 a barrel). However, there is no guarantee that the exchange rate will remain stable, so any changes in the exchange rate, no matter how large, will be directly reflected in the price of gasoline.
The shortages of fuel, real or organized, are one of the layers of the Lebanese crisis. They were particularly apparent in the summer of 2021, when BDL began to remove part of the existing subsidy mechanism, which also benefited fuel oil and gas imports. Although they limited the rise in fuel prices in lira for some time, these subsidies cost several billion dollars from the country's foreign exchange reserves, which have fallen from $33 billion to reportedly less than $10 billion since the end of 2019.