Lebanon’s fuel crisis has worsened over the past week as the country experienced a 24-hour blackout over the weekend, after years of instability in the energy sector . Lebanon’s population of 6 million has faced a 24-hour blackout from Saturday as two of the country’s main power plants, Deir Ammar and Zahrani, run out of diesel fuel, which means they were unable to provide electricity the country needed.
Power was not restored until Sunday after the central bank provided the ministry of energy with $ 100 million in credit to buy the fuel needed to get back on the road. Without the intervention of the central bank, the outage could have lasted several days. Moreover, this credit will only help restore electricity in the short term, with the country relying on a fuel delivery from Iraq later this month to continue.
Power cuts are not uncommon for the Lebanese population, who face power cuts on a daily basis. While the rest of the world is currently grappling with oil and gas shortages, it has been an ongoing challenge in Lebanon for years, with the shortcomings of the state-owned electricity company ElectricitÃ© du Liban. However, these outages were previously managed by the energy sector to ensure sufficient power throughout the day and night. Today, energy companies are losing control due to high prices and scarcity of fuels.
The blackouts have been so frequent that residents fear buying perishables because their refrigerators have become useless without electricity. Food poisoning is a serious risk. Hospitals have had to suspend operations due to the uncertainty of a stable power supply. Additionally, traders have to shut down during power outages or operate in the dark, with only the lucky few having access to backup generators. Now, those who could afford generators face the same problem as energy companies: a severe fuel shortage.
Related: Canada’s Oil Stocks Are Trading At Rock-Bottom Prices One of Lebanon’s main challenges in terms of fuel access is its heavy dependence on imported energy, with fuel constituting more than 20 percent of the country’s import bill. The fuel shortage and rising energy prices have hit the Lebanese people hard. There is also a prevalence of fuel smuggling from Iran via Syria for sale on the black market at higher prices, mainly by the militant group Hezbollah. Additionally, the central bank found itself in trouble as its stock of dollars ran out, meaning it had to restrict imports of subsidized fuel. In addition, Lebanon’s fluctuating currency means that the price of fuel is only guaranteed in dollars.
In August, Lebanon increased gasoline prices by 66 percent in an attempt to tackle the country’s fuel shortages, by reducing government subsidies on fuel. In September, the government was forced to raise prices even further, at one point increasing the price of fuel twice in just five days. The government has so far offered subsidies for the purchase of fuel in a country facing increasing levels of poverty. According to the UN, approximately 78 percent of the Lebanese population fell into poverty, after years of political instability, the 2019 financial crisis and last year’s bombing in the capital Beirut.
While we only see the dramatic effects of poor energy management in Lebanon, the problem has been getting worse for years. Inefficient energy spending and poor organization plagued the country for decades. In 2020, the government estimated that the electricity sector represented around $ 1.6 billion in public funds, with some claiming these costs to be closer to $ 2 billion, or around 3% of the total Lebanese economy. . For a country in debt, the mismanaged energy industry is a huge burden, representing almost half of the public debt.
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Yet, no real progress appears to have been made in reforming the sector, mainly due to political corruption and vested interests. It has been such a big challenge for change that both The World Bank and the IMF have so far refused to intervene for the risk of mismanaged funds due to widespread corruption.
Lebanon elected a new government in power in September, a year after the previous government resigned following the deadly explosion in Beirut in August 2020. The government will be led by President Michel Aoun and seasoned politician Najib Mikati in as Prime Minister. During his inauguration, Anon said he intended to resume talks with the The IMF will finance a stimulus program for the country’s economy. He is also committed to fighting corruption, the root of many of the country’s problems.
But some fear that if this fuel crisis is not resolved, it could push a country with increasing levels of poverty and insecurity into civil war. With all hopes are in the new government, this may be the last chance the political sphere has before Lebanon sinks into destruction.
By Felicity Bradstock for Oil Octobers
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