S&P Global — 28 August 2024
Daily Update: August 28, 2024
Energy Insecurity in Lebanon
By Nathan Hunt
Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy
The phrase “emerging markets” has an implied trajectory. The expression suggests that these economies will shortly attain a higher standard of living related to the availability of consumer goods, energy and better health outcomes. But not all countries are on a path to greater prosperity.
Lebanon once enjoyed a higher standard of living, with its capital, Beirut, known as “the Paris of the Middle East.” However, sectarian divisions and broken institutions have led to a declining standard of living, exemplified by recent electricity blackouts when its only remaining operational power plant ran out of fuel. A relatively prosperous country that loses energy security may become the inverse of an emerging market.
The Zahrani power plant ran out of the gasoil it uses as fuel on Aug. 17. This quickly led to a total blackout across the country, including the Beirut airport, ports, water pumps, sewage systems and prisons. The loss of water pumps in particular reduced water flow to households during the heat of summer.
Caretaker Prime Minister Najib Mikati currently leads the Lebanese government due to an ongoing political crisis. Because of the perilous state of the economy, the country experiences frequent blackouts. By 2023, the Lebanese currency had lost nearly 90% of its value, making it difficult for a country dependent on imports to purchase fuel for its power stations or other basic goods.
In 2021, Lebanon concluded an agreement to purchase Iraqi crude in exchange for Lebanese goods and services, such as healthcare. However, Lebanese power plants cannot process the heavy Iraqi crude, so the country must sell it on the international market and use the proceeds to buy gasoil for its power plants. On Aug. 19, the Iraqi government said oil shipments to Lebanon had been delayed by "logistical and technical issues" and promised to send a new shipment shortly after Aug. 26.
The Algerian government has also announced that it will supply some of its light, sweet Saharan Blend oil to Lebanon to ease the blackouts affecting the country. However, it is unclear how Lebanon, which appears to be struggling to pay its Iraqi partners, will pay for the Algerian oil.
"The strategic issue during this crisis stems from our reliance on a single source. Diversifying sources is preferable," Lebanon's caretaker energy minister, Walid Fayad, said in a statement. "We have been ready to secure 'spot cargo' for some time."
Today is Wednesday, August 28, 2024, and here is today’s essential intelligence. The next edition of the Daily Update will be published Tuesday, September 3.
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—Read the article from S&P Global Market Intelligence
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—Read the article from S&P Global Market Intelligence
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—Read the article from S&P Global Commodity Insights
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—Read the article from S&P Global Commodity Insights
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—Read the article from S&P Global Ratings
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—Register for the in-person event from S&P Global