01 March 2007
As the annual window for state subsidization of "red diesel" heating oil closed on Wednesday, suppliers and consumer advocates complained that third parties had once again robbed the market of supply by hoarding fuel purchased at lower, government-supported rates with the intention of reselling their stocks once prices go back up.
Red diesel, a low-grade heating oil used primarily in furnaces and typically sold by the ton, is subsidized during the cold winter months. The heating oil is dyed red to distinguish it from road-use diesel.
Each year agents posing as oil companies buy the subsidized fuel so they can pocket the difference later, the president of the Association of Oil Importers said.
"We suffer as a result because we have contracts with [gasoline] stations and cannot meet our delivery commitments" Bahij Abu Hamzeh told The Daily Star on Wednesday.
"This time the problem is over because [Wednesday] was the last day before fuel subsidies are lifted," he said, calling on the government to enact safeguards to prevent the practice in the future.
Abu Hamzeh said there are 14 officially registered oil companies in Lebanon, but that red diesel is sold to around 102 companies, most of which are trading firms that change their company registrations and pose as oil companies for the sole purpose of buying and hoarding red diesel.
"They take advantage of the price difference, which comes to around LL3,000 ($2) per gallon. They buy at a subsidized rate and sell it once the government lifts subsidies on red diesel," Abu Hamzeh explained.
The price of a gallon of red diesel will rise from LL13,400 to LL16,400 on Thursday.
The Central News Agency recently reported that red diesel deliveries from the Tripoli and Zahrani terminals on Monday did not exceed 700,000 liters, a steep decline from daily diesel deliveries averaging 3 million liters in previous weeks.
Abu Hamzeh said red diesel deliveries to oil companies on Tuesday rose to 1 million liters.
Petrol stations are also accused of hoarding red diesel and selling it at inflated prices.
On Monday and Tuesday
of this week, four petrol stations were caught in the act, a source at the Ministry of Economy and Trade's Consumer Protection Department told The Daily Star.
Zuhair Berro, president of the Consumers Lebanon NGO, told The Daily Star that he has received many complaints from consumers about gasoline stations hoarding red diesel and selling it at illegal prices.
"Each station sells it at a different price, it is clear the situation is out of control. The Consumer Protection Department should fine them but I doubt they do," Berro said.
