Understanding the Lebanese fuel crisis: How subsidies boosted smuggling ـ Michael Maalouf


Michael Maalouf – NakedPolitics

Overview of the Lebanese economic crisis:

Since the beginning of the Lebanese economic crisis, the fragility of the Lebanese economic system appeared as a result of the flawed policies of the Lebanese government. The high rate of corruption in the Lebanese state and the damages that Lebanon faced throughout its many Wars brought the country backward in development. The Lebanese Lira’s fake stability broke as the rate went above 1,500 L.L. per U.S. Dollar for the first time since 1993. The problem reached higher stages as the Banks trapped their client’s money, Covid-19 lockdown restricting businesses to open for months, and trade with other countries decreased due to political complications. Many describe what is going on in Lebanon as an economic war as the government’s work in solving the crisis seems illogical and irrelevant while opening the way for political pressure to get in the way and cripple the economy’s movement. Due to the hard work of the country’s corrupt politicians, the World bank placed Lebanon in the Top 3 most severe economic crises in history. Historians will recognize their achievements in the history books and their names for the ages to come. However, as time is passing the economic situation started getting worse, with new problems started arising. This article will focus on the fuel crisis that will open a transportation crisis in the future. It is crucial to expose the policies that led us here and show who benefits from this.

Gas station lines are a daily struggle

The disagreement between fuel providers and the government over the pricing system has existed for a long time. For example, days before the October revolution, people rushed to the Gas stations after a statement released by the Gas station owners syndicate stated that all gas stations would be involved in a strike. Right after the announcement went all over the news, the government rushed to give false promises to the syndicate to stop the strike. This game between both sides was on and off while they fooled the people most of the time. 

However, recently, things have changed drastically as long lines in front of gas stations have become a routine for the Lebanese people. These scenes came after many gas stations closed leaving while only a few remained open while applying strict mitigation measures which involve a limited supply of 20,000 L.L worth of fuel and the stations only open for a few hours daily, making the simple task of refueling would take hours of waiting or would require waking up early morning, so they don’t miss work. 

Before getting to the causes of the fuel crisis, we will look at what representatives from different sides had to say about the situation.

George Brax-Head of Gas station owners’ syndicate: “BDL has not given its pre-approval to petroleum importing companies, which allows them to unload electricity-generating ships that have reached the Lebanese waters or will arrive in a few days.”

Walid Dib-head of the fuel companies’ workers and users syndicate: “oil and gas sector is nearing collapse next week when the companies’ reserves run out.”

An internal source from the Ministry of Finance told Arab News: “Failure to directly announce lifting subsidies is due to fear that it leads to public protests with unintended consequences. None of the politicians wants to bear those consequences.”

Similar statements have been recurrent from all the sides that are involved in the crisis. However, looking at who is responsible can be a difficult task as they are all stuck in this web of corruption as smugglers and their partners exploit the subsidy system at the expense of the Lebanese economy.

The booming smuggling business

The problem starts with the fact that the price of fuel in Lebanon has become five times less than the standard global price. As subsidy measures decreased, the prices have been increasing weekly; however, they remained cheap as the Lebanese Lira is witnessing devaluation daily. The low price of fuel has made smuggling a gold mine for fuel traders, gas station owners, and political parties who all have extensively profited from this at the expense of the Lebanese taxpayers. Subsidies have played a role in boosting the smuggling of products of all kinds, which is natural as a hunt for profit, especially in a time of crisis becomes irresistible. 

Removing the subsidy system would stop smuggling; however, entirely removing it at this stage would spark a national emergency as the local population wouldn’t handle the pain that would come with it. Subsidies are like drugs; people get addicted to them, and at a certain point, going cold turkey on them would lead to a lot of pain. As the Lebanese government did not solve the issue, the consequences were severe and would most probably reach much more risky stages. Removing the subsidy system would stop smuggling as it would not be profitable for smugglers anymore as the fuel would not have a competitive advantage in other markets. 

As fuel is becoming scarce and expensive, transportation has been severely affected, mainly since most Lebanese people rely on cars for their daily commute. Public transport in Lebanon is in poor condition and is primarily held by the government. As government regulations also limit the transportation market, the situation is expected to get worse. In rural areas where the economic conditions are much more severe, many citizens have shifted from cars to Tuk-tuks and Motorcycles, currently used as a Taxi service. However, this would not solve the issue as there many other solutions that would help the country get out of this crisis.

What will happen next?

The fuel price will continue to increase but would not match the actual value, while smuggling will continue, leading to long gas lines and extreme fuel shortages. The situation will make the black market stronger as it might become the only reliable fuel source; however, it will take time as it is still present in the internal market. The fuel crisis in Venezuela is the perfect example of how the fuel crisis in its extreme form will become. A youtube vlog did by Drew Binsky under the title “The truth about Venzeula’s gas crisis” will show you how the gas crisis will shift. However, a subsidy sounds good; however, it leads to extreme consequences since a week economy can never hide behind Sedative economic measures.

اترك تعليقًا

إملأ الحقول أدناه بالمعلومات المناسبة أو إضغط على إحدى الأيقونات لتسجيل الدخول:

شعار ووردبريس.كوم

أنت تعلق بإستخدام حساب WordPress.com. تسجيل خروج   /  تغيير )

صورة تويتر

أنت تعلق بإستخدام حساب Twitter. تسجيل خروج   /  تغيير )

Facebook photo

أنت تعلق بإستخدام حساب Facebook. تسجيل خروج   /  تغيير )

Connecting to %s