Cheap Fuel, Endless Crisis in Libya

Under the scorching sun, Libyans wait in long lines at fuel stations, sometimes for hours or even days, just to buy a few liters for their cars or household generators.

Meanwhile, heavy oil tankers speed down highways toward ports, where smugglers load shipments bound for global markets.

Libya, one of the world’s major oil producers and home to Africa’s largest reserves, has seen generous subsidies turn fuel into a prime target for organized smuggling rather than a relief for its citizens.

Fuel smuggling drains an estimated $5 billion from Libya each year, according to the World Bank. More critically, revenues lost outside the state budget have become a key funding source for militias that control vital distribution routes, fueling the armed struggle for power.

In October 2024, a World Bank report noted that “southern Libyan regions repeatedly experience fuel shortages, with prices on the parallel market reaching 7 dinars per liter when available,” while the official price is less than 0.15 dinar.

“We cannot find fuel, and when it is available, it’s sold at higher prices because gas station owners trade it on the black market,” said Mohamed al-Sayyid, a resident of the southern city of Sabha.

With queues stretching outside the few stations that still open, many citizens return home with nearly empty tanks. Families, al-Sayyid explained, are forced to buy from smugglers at exorbitant prices to keep their cars and generators running — “while government subsidies remain only theoretical, with no tangible benefit for ordinary citizens in the south.”

The latest International Monetary Fund figures show Libya paid a steep price for energy subsidies in 2024, allocating $9 billion for fuel alone. The electricity sector — which uses part of that fuel — consumed several more billions.

“When the cost of domestically refined crude oil and natural gas used for power generation is added — estimated at $3.9 billion and $4 billion respectively — the total energy subsidy bill in 2024 reaches about $17 billion, or 35% of GDP,” the IMF said.

Sleepless Ships

On the eastern coast, Benghazi’s old port has become a hub of illicit trade, transformed into a complex center for organized fuel smuggling.

A 2024 United Nations expert report offered a stark picture of the port, controlled by the Libyan army. While Libyans live with chronic fuel shortages, large vessels remain busy, laden with smuggled oil.

The UN documented at least 137 smuggling operations between October 2022 and September 2024, involving 48 ships that called at the port more than 185 times. These were not small shipments: the average cargo per vessel rose from 5,700 tons to 9,970 tons of diesel, bringing the total smuggled volume to about 1.125 million tons.

The ships were often chartered or carried no clear registration, relying on forged or fictitious documents, the report said.

“Benghazi port now reflects a different equation: a strategic location that should support the national economy but has instead become a lifeline for fuel smuggling to foreign markets,” political analyst Ahmed al-Saadi told Alhurra.

Since May 2022, the National Oil Corporation has filed repeated complaints with the prosecutor general about fuel smuggling to Turkey, Spain, Malta and Italy via vessels such as the Queen Majeda, which was seized in Albania carrying shipments worth more than $2 million, al-Saadi added.

“The continuation of this pattern means the port operates with two faces: an official, public activity and another illegal one under the table, doubling state losses and adding pressure on citizens who stand daily in fuel queues.”

In western Libya, smuggling also flourishes through coastal towns such as Zuwara, Zawiya, Sabratha and Khoms.

A 2023 United Nations expert report documented several maritime smuggling cases and identified routes including Sidi Ali near the Tunisian border.

“The situation in Khoms, Zuwara, Zawiya and Sabratha reflects a recurring pattern,” al-Saadi said. “Fuel allocations meant for citizens are diverted through intermediaries to smugglers, who transport them by land toward Tunisia or by sea across the Mediterranean.”

Al-Saadi warned that these towns will remain hubs of the shadow economy — funding armed groups and undermining stability — unless strict oversight is imposed on distribution chains and ports.

Barter Deals: Fuel Outside the Budget

Until 2021, Libya’s central bank imposed a strict ceiling on fuel import allocations, leaving the National Oil Corporation (NOC) up against a financial wall each year.

“Often these allocations ran out before year’s end, and the bank refused the NOC’s requests for more, citing budget violations. This happened amid volatile oil production and low prices, causing liquidity crises and foreign currency shortages alongside rising domestic demand for fuel,” economist Mohamed al-Safi told Alhurra.

To cover the shortfall, the Tripoli-based Government of National Unity authorized the NOC to use a mechanism known as “barter,” exchanging crude oil with intermediaries for refined fuel delivered directly to Libya without cash payments.

“The barter system was fast and effective in supplying fuel, bypassing bureaucratic hurdles such as financial approvals and transfers,” al-Safi said. “But the fuel Libya obtained was not officially recorded in the state budget or accounts.”

“The absence of accurate data on quantities or value opened the door to a lack of transparency and corruption,” he added.

The Libyan Audit Bureau’s 2021 report noted that the National Oil Corporation “exported crude shipments without collecting revenues, instead swapping them for fuel outside the state budget without disclosing the process to the Ministry of Finance.”

The report also said the NOC delayed collecting taxes and royalties from foreign companies worth 10.4 billion dinars that should have been counted as 2021 revenue.

Warnings continued. In its 2023 report, the bureau revealed that spending on subsidized fuel purchases had more than doubled, rising from $2.9 billion (16 billion dinars) in 2021 to more than $7.6 billion (41 billion dinars) in 2023, justified as covering market demand and power plants.

In January 2025, the prosecutor general intervened, sending an official letter to the NOC demanding an end to the barter system. The mechanism was suspended after an agreement between the central bank, the Audit Bureau and the NOC, which created a committee to review all crude-for-fuel transactions during 2024.

War on the Western Coast

Along Libya’s western coast, a silent, undeclared war has raged since mid-2023. Using Turkish drones, forces aligned with the Tripoli government have launched repeated airstrikes on suspected fuel smuggling and storage sites, particularly in Zawiya, home to the country’s largest refinery and a key export port.

The most recent strike took place in August 2025. But images and videos posted by activists on social media showed some raids hitting not only alleged smuggling dens but also residential neighborhoods and civilian facilities. With Tripoli remaining silent, suspicions grew over the campaign’s motives. Observers described it as politically driven, aimed at eliminating militias believed to be loyal to the eastern-based Libyan National Army.

“The airstrikes on smuggling hideouts deterred some armed groups, but they weren’t enough,” political analyst Ibrahim Belqasim told Alhurra.

“There is selectivity in these campaigns. They target groups opposed to Prime Minister Dbeibah’s government, while pro-government militias receive clear military and logistical support, including uniforms, weapons and training,” Belqasim added.

He linked this selectivity to the absence of army and security institutions in western Libya since Abdulhamid Dbeibah came to power, fueling militia dominance in cities such as Zawiya.

Jalal al-Haroushi, a Libya expert at the Royal United Services Institute, was even more skeptical. He argued the campaign lacked credibility from the outset because armed groups were notified in advance of strike times.

Writing on X, al-Haroushi added that Zawiya refinery has been under the control of Dbeibah’s political rivals, the Awlad Bu Hamira tribe, since 2013 — making the strikes less about combating smuggling and more about local power struggles.

Subsidy Reform: Shock or Gradual Change?

At the start of 2024, talk of lifting Libya’s fuel subsidies moved from rumor to public declaration.

Prime Minister Abdulhamid Dbeibah presented the step as necessary to “stop smuggling losses” and stabilize the market. He sought to reassure citizens with three proposed compensation mechanisms: direct cash payments, salary increases, or fuel cards with limited subsidized amounts.

In the east, the position was similar despite political divisions. Parliament-appointed Prime Minister Osama Hammad’s government endorsed ending subsidies but gave no clear timetable.

Public protests and political criticism, however, were swift. In Tripoli, Benghazi and even smaller towns, fear of rising prices dominated daily discussions.

Economists argue that any subsidy reform in Libya must be gradual, paired with compensation for low-income groups and tighter controls on borders and ports to curb smuggling. Others contend a “shock” approach would be more effective for security, swiftly cutting off smuggling networks.

“Gradual subsidy removal has economic benefits. Studies show the inflation from a one-year shock equals the inflation from gradual removal over five years. Gradualism allows citizens to diversify income and adapt to inflation, while shock may push them below the poverty line,” economist Mohamed al-Safi explained.

“The shock method, however, has security advantages, as some politicians argue. It cuts off legal profiteers from subsidies and contains street anger that could pressure the government to back down. But Libya needs a study to determine which option is best,” he said.

Caught between sacrificing the familiar and risking the unknown, Libyans fear the reforms may be a false mask hiding deeper deterioration in living conditions. They face a stark choice: accept a decision that could curb corruption draining the country’s wealth but add a heavy economic burden amid weak guarantees — or remain trapped in a cycle of crises fueled by smuggling networks, with cheap fuel continuing to drive an endless national crisis.