Falling crude prices raise hope of relief for local fuel prices

Fuel prices have increased by an average of 53 percent since the beginning of the year, according to Uganda Bureau of Statistics. Photo | Edgar R Batte 

What you need to know:

Since mid-June, global crude oil prices have dropped by 22.5 percent, setting the stage for reduced pressure on local pump prices. However, retailers say it is too early to call

Global crude prices have for the second straight month dropped raising hope for many African countries, including Uganda for a drop in the runaway fuel prices. 

Since mid-June, global crude prices have dropped by 22.5 percent, setting the stage for reduced pressure on local pump prices.

However, the fall is yet to be reflected in Uganda even as a number of countries across the globe record average drops to about $4 a gallon, retreating to the lowest level since March. 

Crude prices have fallen to an average of $95 a barrel - level last seen ahead of Russia’s invasion of Ukraine. 

Mr Peter Ochieng, a regional fuel expert, Friday told Monitor that it was early to expect a change in local pump prices, noting the change might come next month. 

“If this trend continues, we may see better prices in Uganda towards mid-September,” he said, noting that a peaceful and smooth transition of leadership in Kenya, which is Uganda’s major route to and from the Mombasa Port, was also an important fundamental. 

Local fuel prices have since the beginning of the year surged by an average of 53 percent, according to data from Uganda Bureau of Statistics.   

Yesterday, dealers quoted petrol prices at between Shs6,500 and Shs6,700 in Kampala while diesel was selling at between Shs6,450 and 6Shs6,500 per litre. 

The above prices rose from an average of Shs4,500 for petrol and Shs4,300 for diesel for every litre of diesel in December last year. 

The increase in fuel prices has as a result fed into commodity prices creating a surge in inflationary pressures, forcing inflation to rise to 7.9 percent.

Mr Gilbert Otim, the Stabex spokesperson, Friday said because Uganda does not refine crude, it was difficult to know how movements in the international markets will impact local prices. 

“We cannot know whether this will impact local pump prices. Cruel is subject to refining and there are so many costs involved. Its too early to tell, he said, it’s a whole chain which goes through bulk dealers before it gets to retails for dispensing. 

“So we cannot predict the price stability because of so many fundamentals involved of which the dollar is still volatile,” Mr Otim said

In even of eventuality        

Asked whether the company has enough stocks to withstand any eventuality, including election related violence in Kenya, Mr Gilbert Otim said they have over the last one and half years used the central corridor (Dar es salaam-Mutukula) to transport products, which could be an alternative in the invest of any chaos.

Uganda has a 30 million-litre fuel storage facility in Jinja, holds reserves equivalent to four to six days of fuel stocks, going by the daily consumption of 6.5 million litres but have not been stocked in years.

In practice, the reserves - which are under the state-owned Uganda National Oil Company (UNOC) – have remained largely empty.

In 2017, UNOC moved to rehabilitate the reserves when it entered into a joint venture agreement with a number of companies such as One Petroleum and Mbaraki Bulk Terminal.