The impact of sharply higher fuel prices is becoming increasingly visible in Lebanon, with gasoline consumption falling despite ample supplies, while declining diesel sales are raising concerns about the broader effect on economic activity.

The rise in fuel prices has already pushed up the cost of goods and services, while the decline in gasoline purchases suggests that consumers are cutting back as wages and salaries struggle to keep pace with rising living costs.

Attention is now turning to diesel sales, which are more closely linked to economic activity because diesel is widely used by businesses and industrial sectors.

A further slowdown in sales could create additional obstacles for an economy already struggling to maintain momentum, particularly as rising global oil prices continue to feed directly into domestic fuel costs.

Gasoline Consumption Falls

Fadi Abu Chakra, a representative of fuel distributors, said gasoline sales had fallen by between 30% and 35% as Lebanese consumers faced increasing difficulty keeping up with higher prices.

“People’s salaries and wages simply cannot keep pace with the rise in prices, especially fuel costs,” Abu Chakra told Al-Modon.

He said diesel sales had also declined, although it was too early to determine the exact percentage.

The current drop in fuel consumption is not the first Lebanon has experienced as a result of rising oil prices.

In May, following a surge in global oil prices amid the U.S.-Iran war, the price of a 20-liter canister of gasoline in Lebanon increased by about 40%, while the price of a 20-liter canister of diesel jumped by around 70%, Abu Chakra said.

The price increases caused gasoline demand to fall by about 35% and diesel demand by roughly 50% compared with consumption levels before the increases, he said.

The decline in demand has occurred even though fuel supplies remain more than sufficient to meet market needs.

George Brax, head of the association representing fuel station owners, said at the end of July that gasoline supplies exceeded consumer demand by between 20% and 25%.

Diesel supplies were also around 30% above market requirements, Brax said. Daily diesel consumption averages about 10 million liters, while companies are supplying the market with approximately 13 million liters per day.

A Signal for the Economy

The combination of declining consumption and excess supply could provide an early indication of weaker economic activity.

A reduction in fuel consumption reflects not only fewer trips by individuals but potentially lower production by businesses, even if the impact has not yet become fully apparent.

The consequences could become more pronounced if fuel prices continue to rise, particularly diesel prices. Production in a number of economic sectors depends heavily on diesel, meaning sustained increases could place businesses under significant financial pressure.

The latest increase in the price of a loaf of bread illustrates how quickly higher fuel costs can spread through the economy. The price of a loaf rose by 5,000 Lebanese pounds, highlighting the vulnerability of basic goods to increases in transportation and production costs.

The decline in gasoline consumption is also significant because it does not appear to be the result of an expanded public transportation system encouraging people to leave their cars at home.

Instead, it reflects consumers' declining purchasing power and their inability to afford basic expenses.

Gasoline is a daily necessity for a large proportion of Lebanese consumers. When households begin cutting back on fuel spending, it suggests they are also reducing their ability to carry out routine economic activities.

Pressure on Workers and Businesses

The situation could revive demands from public- and private-sector employees for higher transportation allowances and changes to working schedules, Al-Modon noted.

A similar situation emerged in 2021, when Lebanon experienced severe fuel shortages that resulted in long lines of cars outside gas stations and made it difficult for consumers to secure sufficient gasoline.

Public-sector employees went on strike that year because they could no longer afford to travel to work and maintain full working hours. Many government offices operated with employees coming in only one or two days a week to complete essential transactions.

By the end of 2021, the government increased transportation allowances, with similar adjustments subsequently made in the private sector.

Businesses are also likely to come under increasing pressure as fuel costs rise.

A decline in companies' diesel consumption could signal a reduction in their ability to operate at full capacity. That could eventually lead some businesses to close, while others may reduce the scale of their operations, potentially resulting in job losses.

Taken together, those pressures could translate into a broader contraction in economic activity.

The decline in gasoline and diesel sales therefore cannot be viewed simply as a change in consumer behavior or the number of vehicles on Lebanese roads.

Lower fuel consumption may also reflect growing constraints on the ability of factories and businesses to maintain their operations at the same level.

The fuel crisis is consequently becoming part of a wider economic challenge: whether Lebanon's already fragile economy can absorb the rising cost of fuel and continue operating at its current pace.