After a summer of high-flying energy costs, oil prices rose above $46 as autumn knocked, minimizing prospects in the foreseeable future that a barrel of crude would be available for $30 or less in international markets. Earlier this year, oil exporting countries and analysts had still claimed that a target range of $28-35 was attainable. Today, however, some analysts contend that the recently feared $50 threshold could soon turn out to be a price platform rather than a ceiling–the high price levels making Western consumers pay at the pump for the cost of the Iraq war.
In this context, Lebanese motorists ought to dismiss any hopes for a near-term reduction in gasoline costs to $10 per 20-liter tank filling. However, the political decision to not let gasoline prices rise above $15 per tank has thus far shielded local drivers from possible further increases. “We used to raise prices immediately after they increased on international markets, but this is no longer done,” confirmed an analyst at the ministry of finance.
So at least for the time being, Lebanon’s system of government-mandated gasoline prices, with fixed trade margins for gasoline importers and gas stations, works to the benefit of the consumer, while the Lebanese state is bearing the burden of international oil price increases. It is impossible today to predict the exact impact of international oil market developments on Lebanon’s fiscal situation, however upward price movements will inescapably cut deeper into the state’s revenue from excise taxes on imported oil derivatives. Over the past years, these taxes had increased dramatically in their importance, reaching almost $500 million in 2002. In the context of the dismal state finances, it appears only a matter of time until the government could see itself forced to look at re-adjusting those revenue flows and lift the price cap on gasoline, even if this risks another price shock to the economy.
