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This should raise the price of oil but it is expected that there will be a temporary reduction in the shortage problem.
Lebanon’s caretaker Prime Minister on Friday gave his approval to finance the sale of oil at a higher price than the government’s exchange rate, limiting the temporary supply of oil in the midst of oil shortages.
The election is expected to raise oil prices – but is expected to reduce the country’s economic woes. Lebanon is facing an unprecedented economic collapse and a combination of political upheavals. This poses a serious threat to a small country since the end of the civil war three decades ago.
The currency has lost more than 90% since October 2019, trading at the lowest price of $ 16,450 Lebanese to the US dollar on the black market on Friday. The change of government leaves 1,507 Lebanese pounds to the US dollar.
The crisis, which has been fueled by years of corruption and mismanagement, has worsened in recent weeks as the central bank has reduced its foreign exchange reserves and subsidies. Foreign exchange reserves have dropped dramatically, from the first $ 30bn of crisis at the end of 2019, to about $ 15bn so far. This has caused traders to raise prices or stop importing.
In recent weeks, fistfighting and gunfire have erupted at petrol stations as frustrated citizens approached for hours to fill their tanks. The electricity goes out during the day, and the secret generators have to be turned off for several hours to refuel.
A law signed by acting Prime Minister Hassan Diab on Friday allows for the sale of oil prices to increase in exchange for 3,900 Lebanese pounds instead of a 1,500 pound nail.
While this may temporarily reduce oil shortages by allowing things to resume, this move will raise fuel prices and I’m sure commodity prices will rise sharply.
In his remarks, Diab said he made the decision “based on his views on national security”.
The ruling “seeks to provide oil to citizens for the next three months, especially as the summer season draws to a close, which would allow the growth of the US dollar in Lebanon to be a boon for foreigners and tourists,” he said.
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