Lebanon's fuel price increase may spell end of subsidies

Ministry raises official price of petrol for third time in a month

Lebanon has raised petrol prices for the second consecutive week, signalling that fuel subsidies may be coming to an end.

Twenty litres of petrol on Wednesday were priced at 203,000 Lebanese pounds – the equivalent of $13 at the parallel market rate – up by 16 per cent from last week.

The Central Bank has been gradually reducing subsidies on fuel imports, financing the latest purchases at 14,000 pounds to the dollar – the rate used on its official exchange platform and well above the government-pegged rate of 1,507 pounds to the dollar.

The pound traded lower on the parallel market after the announcement, at about 15,500 to the dollar.

It is the third time in a month that the Energy Ministry has raised the price of petrol in co-ordination with the central bank.

Last week, the ministry increased prices by 38 per cent in a bid to ease months-long shortages, which led to long queues at filling stations and sparked violence in several areas across the country.

Petrol prices have increased five-fold since late 2019, when fuel imports were being financed at the official 1,507 rate.

The pound has since lost over 90 per cent of its market value against the dollar.

Mustafa, a taxi driver, said most petrol stations remained closed on Wednesday as they waited for a technical upgrade to digital pumps that could only display up to four digits for the price of petrol per litre.

Earlier this month, the Iran-backed militant group Hezbollah said it was importing Iranian fuel to fight shortages.

The first shipment was delivered last week.

It was unloaded in Baniyas, Syria and transferred to Lebanon by land to spare Lebanese authorities the dilemma of accepting the shipment at a Lebanese port and risking US sanctions.

Oil shipment analysts TankerTrackers.com said on Wednesday a second shipment carrying fuel earmarked for Hezbollah’s distribution in Lebanon entered the Suez Canal, while a third was about to depart Iran.

The shortages intensified as Lebanon’s economic and financial crisis, which began in late 2019, accelerated. The World Bank has called it one of the world's worst three crises since the 1850s.

The financial meltdown deteriorated further as politicians bickered over ministerial portfolios leaving Lebanon without a Cabinet for almost a year, after the explosion that killed more than 200 people in Beirut and destroyed large parts of the capital.

Prime Minister Najib Mikati, whose government received the approval of Parliament this week, has pledged to enact reforms and seek help from the International Monetary Fund to weather the storm.

Mr Mikati is set to meet French President Emanuel Macron on Friday in Paris.

The French leader and his western allies say financial support for Lebanon is conditional on the implementation of anti-corruption reforms.