Fuel continues uphill trend

Gasoline prices rise by 15 percent in six weeks

The prices of 20 liters of gasoline rose by LL5,000 in six weeks to reach LL36,400 for 95-octane fuel and LL37,000 for 98-octane fuel. Prices are not expected to rise any further in the coming weeks, according to oil expert Rabih Yaghi.

Local fuel prices are directly impacted by variations in global prices. “The price of the dollar, in addition to geopolitical changes in the Gulf countries, and the financial crisis in Europe, has had a huge impact on oil prices,” Yaghi said.

Many steps can be taken to avoid the direct impact of the severe increases in global prices of fuel. Yaghi said that building refineries is one solution. This entails importing crude oil and refining it locally, instead of importing more expensive refined fuel. He said building refineries is a long term solution that could reduce costs by ten percent, thereby cutting the annual fuel bill to $5.4 billion from $6 billion.

Yaghi said that this is a costly solution: “Building a single refinery with the capacity to refine 150,000 barrels a day needs an investment of at least $1.5 billion and three years to be completed”

Another solution is storing fuel. “There should be enough fuel storage reservoirs to last for two to three months,” Yaghi said. He said buying gasoline in winter and diesel in summer and storing it is cheaper. He said storing fuel should be part of the government’s oil strategy.

There are two government-owned storage reservoirs at the Zahrani and Tripoli refineries. Bahij Abu Hamzeh, president of the Association of Oil Importing Companies, said storing fuel requires large spaces that are currently not available. He said setting up storage facilities also requires big investments. Private petroleum importing companies have a few fuel reservoirs in Dora.

A third solution to help stabilize oil prices is liberalizing the sector, Yaghi said: “The government can import fuel (in large quantities) at lower prices, since it has the financial means to do so, and it can compete with the private sector. The private sector will then be obliged to lower their prices.”

Abu Hamzeh said the sector is already liberalized: “All traders can import oil, but this needs many procedures and big storage spaces.” He said the only step the government can take is to set a ceiling for the price of oil. “If prices increase, the State would lower its tax and fees, and if prices fall, the tax margin can be higher,” Abu Hamzeh said.

Reported by Rania Ghanem