Price of gasoline tank to reach LBP 150,000 if subsidies are lifted, U.S. dollar is pegged at LBP 13,000 and global prices remain steady
Talking about the gasoline price and the level it will reach if lifting subsidies is panicking the majority of Lebanese citizens. In light of the absence of a descent public transportation, private cars become a necessity for transportation rather than a luxury.
The total or partial removal of subsidies will certainly lead to a significant increase in the price of gasoline, which have witnessed a surge in prices before the subsidies were lifted. So how much gasoline Lebanon imports annually? What are the prices today, what were a year ago and what is the expected price after the complete lifting of subsidies?
Lebanon imports its needs from 98 and 95 octane gasoline through private companies, and the imported quantities and prices have decreased in 2020 compared to 2019 as a result of the closures taking place in Lebanon and also the drop in global prices.
Table No. 1 below shows that gasoline consumption has dropped 13.1 % in 2020 compared to its previous year from 119 million tanks to 103.4 million, i.e. a decline of 15.6 million tanks. In terms of value, and as a result of the global decline in prices, imports have dropped from USD 1.331 billion in 2019 to USD 827 million in 2020, declining by USD 504 million or 37.8%.
Table No. 1: Gasoline consumption value between 2019 and 2020.
Source: Information International based on the Lebanese Customs data.
Evolution of prices
Table No. 2 below shows the following:
-When global gasoline prices decreased during March, April and May 2020, the government intended to increase the customs fee and the domestic consumption fee, which have risen from LBP 5,060 per tank to LBP 12,630, and when global prices rose, the fees were reduced.
-Although subsidies were not lifted, the price of the gasoline tank has increased from LBP 23,500 in May 2020 to LBP 39,700 in May 2021. The reason behind this rise is the increase in value of the nonsubsidized 10 percent from LBP 4,000 LBP to LBP 10,800, and the global price increase from LBP 5,180 to LBP 16,070.
- If the subsidies are lifted, the U.S. dollar exchange rate is pegged at 13,000 LBP and the global prices remain stable, the price of gasoline tank may reach about LBP 151,000.
Table No. 2: Evolution of the gasoline prices (December 2019-May 2021).
Source: Information International based on the Ministry of Energy and Water’s pricing table.