Diesel price rises slam Middle East

In Baghdad, everybody is talking about the cost of cooking oil doubling, Iraqis say. People have been hoarding it and there have already been protests about the increase in food prices, thanks to shortages caused by the Ukraine war.

But in fact, there's another fuel that could cause worse problems in the Middle East: Diesel. It is used in the region to run backup generators when government electricity grids fail. These generators power everything from water pumps to air conditioners and refrigerators. And the price of diesel has recently hit historic highs. 

"We are going to have a big problem here this summer because of diesel prices," Baghdad journalist Kholoud Ramezi said. "Last March I was paying about $10 for one ampere of power. This March, it was $16. I wouldn't be surprised if it goes even higher in the summer months."

In Lebanon, the rising price of bread has been in the headlines as the Ukraine war causes a wheat shortage. But Beirut local, Wassim al-Shabb, says he'd rather pay more for bread than skimp on diesel during summer. "I can live without bread," he told DW. "But I can't get by in the summer heat, especially with the pollution here."

Backups required

Diesel prices translate to power prices in countries like Iraq and Lebanon because the government-run power grid has not adequately covered local needs for years. Often electricity is only available a few hours a day. So outages are covered by private businesses who run banks of diesel-powered generators that are connected to private homes as well as hospitals.

As the price of diesel has risen to record highs since the beginning of the war in Ukraine, keeping the power in countries like Iraq, Lebanon, Syria and Yemen, will become more expensive. And when temperatures rise to over 50 degrees Celsius, the cost of diesel may become a matter of life or death at worst, and a reason for political and social unrest at best.

Global market

The price of diesel was already unusually high before the Russian invasion of Ukraine. This was due to supply chain issues — that is, producing and shipping diesel — during the COVID-19 pandemic, followed by a surge in demand, after the world started coming out of lockdown.

"Now the conflict in Ukraine is making a bad situation a lot worse," Javier Blas, a Bloomberg columnist specializing in the energy sector, wrote in a mid-March column. Last month, global diesel prices hit historical highs, increasing faster than petrol prices.

A lot of diesel comes from the Middle East, especially from Saudi Arabia, and locals in the region pay some of the lowest prices in the world for it. But some countries have far less of it than others.

For example, Lebanon, Jordan and the Palestinian Territories are poor in resources, with Lebanon importing all of its fuel needs, Anas Abdoun, a senior analyst focused on the Middle East for energy consultancy, Stratas Advisers, explained. "And Iraq produces diesel but not in sufficient quantity for the needs of its population. Local refineries do not operate at full capacity due to lack of maintenance," he added.

In some of those countries, diesel is subsidized by the government. But prices are not sealed off from global markets so they rise despite being subsidized, Abdoun noted.

Adding to Lebanon's crisis

"Here, the government only manages to supply two to five hours [of power] every day," Ramezi explains the situation in Baghdad. "In the hottest part of summer, it's even worse." This is because as demand rises to power water pumps and air conditioners, government-run plants cannot keep up.

"So in Baghdad, people, who can afford to, pay for extra power," Ramezi continued. "I use this [backup generator] system more than I use the national grid. And in summer, I pay even more so that I can use the air conditioner."

In Iraq, locals pay for different levels of access to a private generator, based on how many hours they want electricity for and at which strength. For example, if one pays for 10 ampere for 24 hours, this can power an air conditioning unit for the whole day.

"But low-income families in Baghdad cannot do that," Ramezi told DW. They might only pay for 3 ampere voltage which would only run a fan, or they only pay for power at night so they can cool down to sleep, she said.

In Lebanon, the high diesel prices add yet "another layer" to the ongoing political and financial crisis there, said Anna Fleischer, who heads the Heinrich Böll Foundation's office for Lebanon, Syria and Iraq in Beirut.

Lebanon has had an electricity crisis for some time now, she told DW. This means that almost all power is now supplied by backup generators.

"Now, with the prospect of rising diesel prices, many people will no longer be able to afford to keep these generators running," Fleischer said. "This is likely to cause considerable problems for those who depend on [the power]."

That includes hospitals and nursing homes and "people who can't be in the heat for health reasons," she noted.

Protests expected

"Remember the pictures from last summer of children sleeping on balconies because of the heat?," Sirine Khayat, another Beirut local, asked. "Remember how we were stressed all summer hearing stories of older people who might suffocate because they couldn't afford diesel to keep their oxygen machines functioning? I'm really not ready to go through all that again," she sighed. 

This summer, the increase in diesel prices may become a political problem again too, Abdoun of Stratas Advisers said.

In Lebanon, higher diesel prices won't just cause a physical problem, they'll feed inflation in the already troubled Lebanese economy. "That may further exacerbate social tensions," he told DW.

And in Iraq, the last few summers have already seen anti-government protests erupting due to the lack of power and other public services.

In the southern city of Basra, where temperatures rose to 53 degrees Celsius last year, there have been protests every summer since 2015. In 2018, these became increasingly intense and violent. They were also seen as a precursor to widespread protests throughout Iraq the following year that resulted in a change of government.

The province Basra supplies about three-quarters of Iraq's oil. But at the same time, it has above-national-average levels of poverty and unemployment.

This coming summer, "will be very hot for Iraqi people who cannot afford power," Baghdad-based journalist Ramezi warned. "But what can they do? If the prices go up, they have no options."

"Last summer, we had to forgo some foods to be able to afford diesel," al-Shabb said of his family's situation in Lebanon. "We tried to save money for diesel and for our refrigerators. But now prices are rising. If we don't buy diesel, food will be rotting in our refrigerators. So whatever we do, we struggle."

Edited by: Andreas Illmer