Lebanon fuel suppliers say shortages will continue despite revised subsidy

Decision taken by officials on Saturday did not address limits on how much fuel can be imported

People push their cars along a queue of vehicles waiting to fill their tanks at a service station in Dora, Lebanon. Reuters

A deal in Lebanon to change the dollar exchange rate for fuel imports will improve supply, but not enough to meet demand, a station owners’ union and a fuel importer said.

The country’s central bank governor, Riad Salameh, President Michel Aoun, caretaker Prime Minister Hassan Diab and other top officials met on Saturday evening and decided that petrol, diesel and cooking gas imports would be subsidised at the rate of 8,000 Lebanese pounds to the US dollar instead of the previous rate of 3,900 pounds.

They evaluated the maximum cost of the decision, which is effective until late September, to be $225 million.

As a result, fuel prices soared by 66 per cent overnight. The Energy Ministry said on Sunday that the price of the widely used 95-octane petrol would rise to 129,000 Lebanese pounds a litre and the price of diesel to 101,500 pounds a litre.

“This is bad news. People’s salaries remain the same,” said Toufic Moussa, who owns a taxi business. Fifteen of the 40 drivers at his company have quit in recent months because customers could no longer afford the fares.

Mr Moussa said petrol stations were not open on Sunday morning.

George Brax, a spokesman for the station owners’ syndicate, or union, said stocks of fuel-importing companies should be replenished within 10 days, which would improve fuel supply.

But the central bank, Banque du Liban, remains in control of the fuel they can import, and limits the quantity to two ships every month, Mr Brax said.

“The crisis will remain. This doesn’t change anything,” he said.

A BDL representative said they did not have details on the matter.

A fuel importer said their company could purchase the equivalent of one to two fuel ships a month. “It’s erratic. There are no clear rules,” they said.

Figures shared by the importer show fuel purchases from both the private and public sector, including diesel and petrol, decreased by 13 per cent between 2019 and 2020.

The decline is not enough to explain current shortages, the importer said.

Two other elements must be taken into consideration: a steep rise in demand for diesel and smuggling to neighbouring Syria, where prices are higher. Diesel powers private generators, which have run nearly 24 hours a day since the state power grid collapsed.

The figures show that fuel imports by Electricite du Liban, the state-run electricity company, decreased by 25 per cent from 2019 to 2020. An EDL representative was not immediately available for comment.

The central bank has been subsidising fuel imports since the start of the country’s worst economic crisis in 2019. Since then, the value of the local currency, officially still pegged at 1,500 Lebanese pounds to the dollar, has plummeted to 20,000 on the parallel market.

Inflation has soared as the country largely relies on imports for food and fuel. A UN report released this month said 78 per cent of the population now lives in poverty.

Despite repeated warnings, Mr Salameh caused a furore among the country’s political class when he announced on August 11 that the central bank would stop subsidising fuel imports as its reserves were drying up. Mr Diab called the move “illegal”.

Fuel shortages worsened and deadly clashes increased at petrol stations across the country, where customers must queue for hours in the blazing heat. The army was deployed to confiscate fuel from hoarders, accused of smuggling stocks to neighbouring Syria.

Tragedy struck on August 15, when a tanker that had been seized by the army exploded in north Lebanon and killed at least 30 people who had gathered in the hope of getting some fuel.

Politicians have proven unable to respond to Lebanon’s crisis. The country has been without a fully functioning government for more than a year, after a deadly explosion at Beirut port forced Mr Diab to resign.

Two prime ministers have been designated since the blast. Both failed to form a Cabinet. The latest nominee, veteran politician and billionaire Najib Mikati, has been negotiating ministerial portfolio distribution with Mr Aoun since late July.