Thursday March 10 2016

Stable Shilling, high supplies bring local fuel prices down

A board displaying fuel prices at Total Kibuli

A board displaying fuel prices at Total Kibuli in Kampala. Pump prices have dropped, a move that experts attribute to a stable Shilling. Photo by Rachel Mabala  

By Dorothy Nakaweesi

Kampala. Fuel pump prices across major fuel operators have dropped by between Shs150 and Shs500 over the past two weeks, granting motorists relief that industry players say is temporary.
A mini-survey by Daily Monitor in and around Kampala central business district fuel stations showed that diesel has had a bigger drop of about 20 per cent while petrol experienced a 7.3 per cent drop since the beginning of the year.
The fuel stations, mainly Shell, Total, Kobil, Hash and Petro had their pump prices average at Shs3,400 down from Shs3,650 a litre.

By the same token, diesel prices have been seen on a downward trend currently a litre costs Shs2, 500 down from Shs3, 000.
Although there has been mild drop since the beginning of the year, dealers attribute the current drop to low global oil prices caused by abundant supplies from the producing countries and slow demand.
As of yesterday, information from the Organisation of the Petroleum Exporting Countries, a barrel of oil was quoted at $34.3 (Shs115, 248).

Stable forex
Experts also attribute the drop to the strengthening of the Uganda Shilling against the US dollar, the currency for international trading.
In an interview with Daily Monitor, Hash Energy general manager Peter Ochieng said: “The prices dropped due to favourable forex rates which have slightly contributed to the current prices.”
Uganda imports its fuel and payments are done in dollars which has exhibited some stability against the local currency since the beginning of the year trading in the ranges of Shs3,300 to Shs3,400.

By close of business yesterday, the Shilling was buying at 3,358 and selling at 3,368 per dollar.
In the same vein, Vivo Energy Uganda managing director Hans Paulsen said the current low prices are due to the favourable and stable exchange rates.
He, however, said: “As to whether this drop will remain or continue going down, I cannot tell but as long as all factors that have facilitated this trend remain constant, then we shall too pass on the value to our customers-by reducing the price further.”

However, experts say the drop is temporary as global prices of oil have started edging up.
Kobil country manager Anthony Gatandi, told Daily Monitor that: “The drop is a reflection of the fuel we procured earlier when the international prices were at their lowest.”
He, however, added: “We have started seeing prices of oil going up something that is likely to go on until the end of March. This means the drop in local prices is temporary.”

Falling prices of fuel to the private sector is good news, this being a complementary commodity means that they will be spending less and getting more fuel in terms of quantity.
Tom Emolut, a taxi driver plying Kampala-Bweyogerere route, said with the new fuel prices, he is able to make and save more money.
“My vehicle uses diesel; before when the prices were high I would make below Shs150, 000 but now, on average I retire with Shs200, 000,” Emolut said.

However, Uganda Manufacturers Association executive director Ssebagala Kigozi thinks the drop is insignificant.
“I do not think this 10-20 per cent drop in fuel prices will impact or cut back on the cost of doing business because it’s insignificant. More so, we cannot tell whether it will be consistence,” he said.

Private Sector Foundation Uganda executive director Gideon Badagawa said: “Fuel prices dropping is one of the costs to manage among many others if we are to remain profitable and compete.”
“Both government and the private sector must be efficient in all our operations to eliminate unnecessary costs. Government should also help to better regulate the oil industry otherwise we fall prey to dealers,” he added.

Output freeze
Oil prices went above $40 (134400) a barrel yesterday, driven by anticipation that the world’s largest exporters may agree as soon as this month to freeze output, which could accelerate a decline in the largest global build in unwanted crude in years.
According to media reports, producers in and outside the Organisation of the Petroleum Exporting Countries plan to meet in Moscow on March 20 to discuss an output freeze.