Ensure Vitol’s scorecard makes for good reading

The latest consumer price index (CPI) print indicates that energy, fuel and utilities inflation was, along with services inflation and food crops inflation, one of the key monthly inflation drivers. The dataset put out by the Uganda Bureau of Statistics (Ubos) shows that diesel and petrol prices increased by 1.4 percent and 0.4 percent respectively in April. 

Uganda has previously blamed so-called middlemen for the consistent failure to offer competitive discounts at the pump. 

Uganda’s petroleum products, and indeed those of countries in the hinterland, are imported through Kenya via a government-to-government (GtG) arrangement.

Previously, an Open Tender System (OTS) was used. Mr Museveni is not in doubt that the current GtG, much like its predecessor—the OTS, is not insulated from the influence of middlemen who have compounded the pain of people in Uganda at the pump.

Next month, Uganda will start importing her petroleum products directly through a deal with Vitol Bahrain. The Uganda National Oil Company’s maiden cargo of super petrol and diesel is expected in the country anywhere between June 18 and 26. This is undoubtedly great news, but we reckon that it is vitally important to contextualise it.

A number of things must be accentuated. For starters, tariffs by the Kenya Pipeline Company (KPC) will still apply under the five-year contract Uganda has with Vitol Bahrain. It is also consequential that the Ugandan government articulates, clearly, what the road ahead looks like. Will the negotiated deal with Vitol Bahrain culminate in lower pump prices? When? If not, why?

During the reading of the April CPI print, Ubos made clear that petroleum products take some time to respond to new, cheaper stocks. There was some ambiguity as to when the current stock—a key driver for inflation in April—will run out.

We believe that the importance of removing such grey areas cannot be understated. Clarity is all that end users of imported petroleum products in the country ask for. Surely, this is not too much to ask for. If the 6.9 percent year-on-year spike in petrol prices is to be blamed on the deal the Kenyan government negotiated with Saudi Aramco, Emirates National Oil Company and Abu Dhabi National Oil Company or indeed middlemen, should we expect Vitol Bahrain to wave a magic wand? Government functionaries have indicated as much. Lower pump prices are to be expected. This is, of course, music to the ears of end users of petroleum products who have over the years paid much more than a fair price at the pump.

A recent empirical study showed that no country in the hinterland pays more for its downstream petroleum products than Uganda. If the Ugandan government succeeds in addressing this injustice, it should be given its flowers. We desperately hope that this turns out to be the case. The coming months will be able to return a scorecard. Our prayer? May it not make for grim reading.