Journalist Khaled Abu Shaqra wrote an article in An-Nidaa al-Watan, stating: "A new challenge, unforeseen, is facing the economy and, behind it, the citizen. The huge surge in the price of crude oil has turned the race between the 'tortoise' of crisis response and the 'hare' of global inflation into a grueling match. What slows down the Lebanese competitor further and threatens its collapse 'dead' in the arena is the continued subsidy for fuel and the draining of further reserves.
Lebanese woke up yesterday to a price increase of 28,000 Lebanese pounds for each canister of gasoline and 41,000 for diesel, while the price of a gas cylinder rose by 15,000. Accordingly, the price of gasoline approached 400,000 pounds, diesel reached 375,000, and gas to 288,000 pounds (actually sold for over 310,000).
**Causes of the Rise**
The reason for the increase is due to the price of a barrel of oil exceeding $116, with the price of a kiloliter of gasoline at $61.47 and diesel at $97. This is despite the stability in the exchange rate of the dollar. The Central Bank of Lebanon has maintained the exchange rate for dollars it secured according to the Sayrafa platform for importing 85% of gasoline at 20,200 pounds, and for the remaining 15%, which must be paid in cash, at 20,703 pounds, according to member of the Fuel Station Owners Syndicate George Brax.
**The Public Sector "In the Past"**
The ripple effect of rising fuel prices on various goods and services, especially in transportation and generators, is 'a foregone conclusion', but the greatest impact will be on the budget and the Central Bank of Lebanon.
Budget figures were set based on an oil barrel price fluctuating between $72 and $81, while the current price exceeds $118, with expectations of further increases in the coming days. The first shock will be the loss of the transportation fare, set in the budget at 64,000 pounds, which becomes almost non-existent. As stated by Nawal Nasr, head of the Public Administration Employees Association, 'the amount is equivalent to just 3 liters of gasoline, not enough to cover more than 10 kilometers'.
The disaster is that this small transportation allowance and the social assistance included in the budget are contingent on a 66% attendance rate being secured before the end of March and on a daily basis thereafter throughout the official working hours. Simple calculations reveal that 'the total of social benefits + transportation allowance + basic salary + the five raises granted after 2017 for an employee in the fifth category amounts to $1.6 daily', according to Nasr. Approximately 13% is deducted for income tax, with a 6% contribution to the pension fund and a 3% contribution to the cooperative or insurance fund. Meanwhile, 'the daily wage for employees in the third and fourth categories with degrees ranges between $2.2 and $3 daily', meaning that the monthly salary is insufficient even for a single day's expenses, even with the increases. This represents a true physical liquidation of state employees and public administrations alike at the expense of supporting other sectors, as the budget project includes a sum of 191 billion pounds to support salaries and wages at Ogero Telecom, for example, and not limited to that.
**The Crime of Continuing Subsidy**
In light of the significant price hikes in fuel, the Central Bank of Lebanon continues to subsidize every dollar of imports by 500 pounds, equating to 500 billion pounds, assuming annual consumption reaches $1 billion. It is noted that this subsidy no longer provides any benefit to citizens, while imposing additional burdens on the Central Bank, which continues to deplete reserves.
The most puzzling aspect is that this veiled support maintains the intervention of the Ministry of Energy and Water in the sector, issuing price tables daily. What is needed today is 'to free the sector completely from the Central Bank's support and the Ministry of Energy's intervention in prices,' says oil and gas expert Dr. Shrebel Skaff. 'It is no longer permissible in any way for officials to delude public opinion into believing that they are standing by it with the meager support for gasoline prices, while they are paying the price of this support with further economic collapse on a national level.'
'What has not yet been taken into account is that the Russian war on Ukraine is open to all possibilities,' says Skaff. 'Especially since, according to the apparent data, it will not be swift. This could lead to further increases in global oil prices, resulting in dire consequences at the domestic level. Therefore, it is crucial today to quickly break this vicious cycle we find ourselves in by halting support for other oil derivatives and moving directly towards structural reforms and placing the economy on the right track.'
**Removing the Need for Energy Ministry Oversight**
With the complete removal of subsidies, the need for the Ministry of Energy to intervene in pricing oil derivatives and issue daily price tables becomes obsolete. This aligns with practices in countries around the world, where prices for gasoline, diesel, and gas are determined based on market supply and demand rules, with prices varying from company to company. For example, in France, there is no uniform price among companies; each establishes its gasoline price differently from others,' says Skaff. This margin in price variation increases competition among companies, enhances services, and improves offerings to attract customers.
In Skaff's opinion, 'the economy cannot continue with a socialist subsidy policy, especially as the country has defaulted and lost all its revenues, exhausting what remains of mandatory deposits in the Central Bank. Most dangerously, no structural reforms have been implemented to date. We have not completed a review of the public sector, nor a liberalization plan for the electricity sector that allows for building small companies in districts and opening them to competition... among many other neglected measures and actions.'
The old approach of the authorities in confronting external and internal transformations based on quota-sharing and neglecting fundamental reforms is no longer effective. If serious competition is not introduced to the markets, the farce of subsidies halted, and immediate and future reform conditions implemented, the country is headed for an unprecedented social and economic catastrophe."
