Falling global oil prices draw mixed reactions from local fuel dealers

A Vivo Energy Uganda employee takes measurements of fuel in a tanker at the firm’s head office in Industrial Area Kampala. A drop in global oil prices has seen the firm reduce prices by about Shs100. Photo by Stephen Wandera

What you need to know:

Volatility of the shilling also playing a role in pricing of the fuel.

Kampala- The decline of the global oil prices to a four year low of about $83 (about Shs 223,270) a barrel from $115 (about Shs 309,350) has been received with mixed reactions by the local fuel dealers.

Vivo Energy Uganda, which sells and distributes Shell branded fuels in the country, reacted with an average reduction of Shs100 on the prices of diesel and petrol, according to Mr Hans Paulsen, the company managing director.
Mr Paulsen said Vivo Enerygy Uganda’s decision was informed by the tumbling prices of Brent crude.

He explained: “There are several factors we consider in setting pump prices at Shell Service stations. The world oil prices (Platts) are one key determinant.”

Brent Crude is a major trading classification of sweet light crude oil that serves as a major benchmark price for purchases of oil worldwide.

On the contrary, The City Oil chief executive officer, Mr KL Raghavan, said the company chose to maintain the pump prices because the scale down of the oil prices has not reflected on their purchasing price.

“So far, the fall of the prices is only being registered in newspapers. We shall cut the prices when the reduction in the cost of oil shows in our purchases,” he said in an interview with Daily Monitor. He added that the strength of the shilling is another factor which influences the pricing of their fuels.

He said if the recent volatility of the shilling persists, there are minimal chances of reducing the pump prices.

The prices of Brent crude declined from about $115 a barrel in June to about $83 a barrel now, which has been noted as the lowest price in four years.
A survey by this newspaper revealed that, depending on the service station and its location, the prices of petrol ranged between Shs2,680and Shs2,800, while diesel sold between Shs2,300 to Shs2,100.


Mr Shaban Serunkuuma, a consumer activist and programmes director at Consumer Education Trust Uganda, said the reaction by dealers is unfair but not surprising. “When the global prices shoot up, the local dealers quickly increase their prices.

When they go down, they take their time. There is need to regulate their operations to stem these tendencies,” he said.

However, Vivo Energy managing director disputed the activist’s assertion, saying: “Uganda is a landlocked country and most of the importation is done from the Middle East via Kenya, which means that at any specific time we have two to three months of stock in the logistics chain. As a result, you cannot experience the resultant effect of the drop immediately.”