Why you should worry over rising fuel prices

A Shell fuel station in Kampala displays oil prices recently. PHOTO BY ABUBAKER LUBOWA

What you need to know:

  • By end of last week, the pump price of petrol closed at Shs4,000 while that of diesel traded at about Shs3,420.
  • In the last three months alone, the pump price of petrol has increased by more than Shs500.
  • Elsewhere, governments buy, import, supply and sell fuel just like any other player, thus controlling the final pump price to the final consumer.
  • Despite the public outcry over the pump price volatility, the government will not intervene but leave it to the market forces to deal with the situation.

Once more, the pump price of fuel has gone up, this time by Shs30. This is the second pump price increment in as many days.

By end of last week, the pump price of petrol closed at Shs4,000 while that of diesel traded at about Shs3,420, only days after the pump prices going up.
Barely 48 hors later, there was an additional increment on the pump price of both petrol and diesel by Shs30, raising the price of petrol to Shs4,030 and that of diesel to Shs3,450.

And the increment is not about to stop, given the government proposal to slap Shs100 more tax on fuel in the coming 2018/19 Financial Year.
In the last three months alone, the pump price of petrol has increased by more than Shs500 while that of diesel has gone up by about Shs400.

Already, motorists are feeling the pinch as they pay more for less, but the final consumers will shoulder the burden as additional cost incurred will be passed over to them.

Already, upcountry fares have increased. Fares to Jinja now stand at Shs6,500 up from Shs5,000 while several Western Uganda routes have also revised their fares upwards, with Northern and West Nile routes believed to be on the verge of increasing fares as well.

When contacted, the traders and transporters associations said they are not prepared to shoulder the burden anymore, warning that the costs will be passed over to the consumer.
“Eventually we will have no option but increase the fares,” the general secretary of Amalgamated Transport and General Workers Union said when contacted last week.
“Because of lack of regulation, the market is distorted, so we will eventually pass the burden to the consumers because on our own we cannot shoulder it. We also get defeated,” he added.

The spokesperson, Kampala City Traders Association (KACITA), Mr Isa Ssekitto, told Daily Monitor an interview that the effect of the high fuel pump prices is already evident on their members.
“We are already feeling the pinch. It is in times like this that the country should be protected from such shocks but the government has no enough reserves to take charge of the situation,” he said.

The executive director of Private Sector Foundation Uganda (PSFU), Mr Gideon Badagawa, when interviewed for this article, said: “The prices of fuel affect key sectors of the economy. It means traders, suppliers and transporters will be forced to increase the cost of their services and that has a ripple effect on the economy, including the final consumer who will struggle to afford the cost of goods and services being produced.”

‘Regulate the market’
Members of Tax Justice Alliance in Uganda, among them the Southern and Eastern African Trade, Information and Negotiations Institute (SEATINI-Uganda), Uganda Debt Network, and Civil Society Budget Advocacy Group (CSBAG) want fuel prices regulated.
“We believe that government should not only be a tax collector, but an active sector player.
Elsewhere, governments buy, import, supply and sell fuel just like any other player, thus controlling the final pump price to the final consumer,” the Programme Officer, Financing for Development/Tax Justice at SEATINI, Ms Nelly Busingye Mugisha said in a statement.
“We also propose that the government uses the National Oil Company (NOC) of Uganda to regulate fuel prices,” she continued.

Government position
But Energy minister Ms Irene Muloni said combination of the logistical costs together with the cost of the imported products, which increased as a result of increased refinery premiums in the Open Tender System since September 2017, have resulted in the increased pump prices.

Ms Muloni said in her statement to Parliament earlier in the month that internationally, the monthly average crude oil prices per barrel started rising from $52.02 in August to$55.74 in September, $57.50 in October to 62.49 in November and $62.89 in December 2017 to $ 69.45 in January 2018.

She said the rise in crude oil prices was due to the huge storm in the US that shut down many of the production sites and refineries in US Gulf coast.
But the oil prices continued to increase in November and December 2017 as the Organisation of Petroleum Exporting Countries countries agreed on extending production cuts further to June 2018, showing their willingness to balance supply and demand.

Ms Muloni said the interplay of the rise in crude prices and refinery premiums (since we import refined products only) are major causes of the rise in pump prices since the rest of the parameters like taxes, transport and handling costs have been constant.

Despite the public outcry over the pump price volatility, the government will not intervene but leave it to the market forces to deal with the situation.
This is because the country operates under the policy of liberalisation—free market economy where government has no say over the prices of commodities.