The Liquidity Crisis
With no comprehensive government structures, Lebanon has an extensive list of unresolved issues, including a severe fuel shortage, that have been heavily impacting its economy. Lebanon’s 2019 liquidity crisis, caused by the country’s mounting debt built up from the 1975 Lebanese Civil War, is still ongoing, and the Lebanese currency has been losing value at a rapid pace.
With the Lebanese pound (LBP) losing more than 90 percent of its value following the 2019 crisis, the country is experiencing one of the worst hyperinflations in global history. The U.S. dollar was originally pegged at 1,500 LBP before the liquidity crisis, but as of September 23, 2021, the rate for $1 USD is at 16,100 LBP. This amount was approximately half, at 8,000 LBP, only five months ago. The black market, however, is currently selling the U.S. dollar for 18,750 LBP. Due to Lebanese banks limiting weekly withdrawals, citizens are left with no choice but to turn to the black market in order to get their money.
The Lebanese government has placed responsibility for the inflation on websites that have been reporting the black-market rates in contrast to the bank’s rates. They have banned these websites in an attempt to fix the exchange rate, but there has been no change following the ban. That said, with Lebanon’s financial crisis still at large, one of the most severe outcomes has been the fuel shortage.
The Fuel Shortage
The 2019 liquidity crisis has caused a severe decline in petroleum imports, which impacted Lebanon in numerous ways. Gas stations have begun limiting customers, while many others have even closed down entirely. This was caused by the pricing standoff, as some sellers worried that their stores might run out quickly. The country is also facing blackouts that sometimes last for up to 24 hours. The shortage has even begun impacting hospitals, as they are unable to keep both the necessary machines and the lights on. Suleiman Haroun, President of the Syndicate of Private Hospitals, publicly called for action to be taken, as the insufficient fuel has put patients in danger.
While the cause of such an intense fuel shortage is multifold, there are many clear-cut sources. Some of the blame has been placed on citizens who have been smuggling and hoarding the fuel as a result of the Lebanese government reducing their subsidies on it during the country’s worst financial crisis. This blame is further extended, however, towards the government who has purposely neglected the proper importation of fuel. Their negligence is ultimately the reason why citizens felt the need to hoard the fuel to begin with.
This hoarding, however, ended in horror in the town of Al-Tleil, two weeks after the first anniversary of the Beirut explosion. On August 15, 2021, a fuel tank explosion occurred, killing 33 and injuring 80. The explosion happened when the Lebanese army was distributing the hoarded fuel, found hidden on a land plot, to citizens. The exact trigger of the explosion is unknown. Some claimed it was a gunshot hitting the tank, while others claimed it was a lighter being ignited. The mixed reports resulted in the arrest of the son of the owner of the land where the blast had occurred.
As of August 2021, fuel prices are up by 70 percent due to the Lebanese government making continuous subsidy cuts on fuel importation. Such subsidy cuts mean that the money granted for these importations by the government has been reduced so much so that prices for fuel have skyrocketed due to limited supplies. In only two months, the cost of hydrocarbons, the main source of energy worldwide, has tripled. This was caused by the central bank of Lebanon decreasing its support for its imports. To further put matters into perspective, within a year, the price of a gallon of fuel has soared by 220 percent.
The cash-strapped government has driven the smugglers and hoarders towards Syria, where black-market profiteers are selling gasoline at alarming rates. Lebanon’s consumption of fuel is needed at high levels as electricity production has decreased, causing blackouts throughout the country. Lebanon’s electricity is on for only a few hours a day, if at all.
The crisis was further intensified when the central bank extended a line of credit to imported fuel, based on the exchange rate for the LBP, which is constantly increasing. In other words, the Lebanese central bank enabling the government to draw the necessary funds will lead to increased debt.
The Rise in Violence and Protests
The scarce supply of fuel has led to immensely long lines at the few gas stations that have remained open, which last for hours on end. Highway exits have been congested by sometimes up to three lanes of cars waiting their turn to fill up at stations. With no metro system, no bicycle lanes, and very few buses, Lebanese citizens are left with no choice but to wait. In many cases, after several hours of waiting, employees still turn people away.
This crisis has led Lebanese citizens to violence, with the use of knives, guns, and even hand grenades having been reported. Fights have broken out all throughout the country, and on August 9, 2021, three men were killed in separate fuel-related brawls.
Citizens have been fed up with the Lebanese government’s inaction, and protests are breaking out demanding change. Following the deadly explosion in Al-Tleil, demonstrators threw stones at Prime Minister Najib Mikati’s home. Demonstrators also blocked the streets of Beirut after the Central Bank announced the end of subsidies for fuel imports. Unidentified individuals have also reportedly fired gunshots and a rocket towards gas stations in Beirut.
The Future For Lebanon
In mid-September of 2021, 4 million liters of Iranian fuel crossed the border from Syria into Lebanon. The importation from Syria was Hezbollah’s strategic way of avoiding US sanctions, seeing that Lebanon is unable to import from Iran. As bystanders observed the fuel arriving in Lebanon, the convoy was met with celebratory gunshots, as well as the throwing of rose petals and rice. Once usage began, however, citizens had mixed reactions, as the quantity of fuel delivered by Syria will barely make a difference in terms of resolving the crisis.
While leaders have begun attempts to resolve the fuel crisis, with Iran beginning to supply the country, it seems as if there is a long road ahead. With the liquidity crisis still devastating the country, sufficient fuel in Lebanon will continue to be unaffordable and unattainable.
