High diesel prices pegged to slow supply chains

A pump attendant fills a fuel tank. High demand for the commodity has also contributed to the high price of diesel PHOTO / file

What you need to know:

Latest figures show that a litre of diesel costs Shs5,339, while petrol costs Shs5,080 at Total.

Diesel has continued trading above petrol for more than five months. This trend kicked in mid last year when fuel prices peaked. Somehow ending the Russia – Ukraine war effect that had oil prices around the globe skyrocketing.

Latest figures show that a litre of diesel costs Shs5,339, while petrol costs Shs5,080 at Total Wampewo.
Although things are expected to stabilise and the price to come down in the second half of 2023, there is no immediate solution in the short term.

Mr Solomon Muyita, the communications officer for the Ministry of Energy attributes the high diesel prices to the supply side constraints.

“Diesel prices being up is a situation that is all over the world not in Uganda alone. Supply has failed to match demand because there is an increase in transport,” Muyita notes.

High demand for the commodity has also contributed to the high price of diesel as it powers the economy. Most of the public and heavy duty vehicles, including taxis, buses, and cargo trucks use diesel engines.

The demand for public transport increased as fuel prices were going up because most people opted to park their cars.

This put pressure on the reserves yet imports were not coming in at the same pace.
According to figures from Uganda Revenue Authority, (URA) diesel imports from July 2022 to date,  fell from 86 million litres in July last year to 76 million litres as of December 2022.

But in the second half of 2021, diesel imports rose from 64 million litres to 87 million litres. 

Mr Muyita reveals that several engagements have been held at different levels globally to see that the price of diesel comes down. This includes increasing the supply of crude oil to refiners.

Mr Tom Ayebare, the manager for economic and financial analysis at Petroleum Authority of Uganda,asserts,”Oil supplies globally, ran into a brick wall when the Russia Ukraine war broke out in February last year. Since then, Russia that accounts for 13 percent of the global supply has seen its oil blacklisted all over the world. Hence, the price spiral.”

The high price of diesel is reflected in commodity prices, since most of the transporters public and cargo rely on diesel.

Currently, inflation stands at 10.2% according to last figures from the Uganda Bureau of Statistics and this majorly driven by the food crop inflation which stands at 29.4 percent.

Light at the end of the tunnel
Since July 2022, the price of diesel has dropped more than Shs1,000 and is projected to drop further this year.

Ayebare notes, “The world has come to terms that Russian oil is off the market and solutions have been found. We see countries like Norway and Venezuela coming in to fill that void. So, the issue of supply is being sorted out globally.”

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