Fuel crisis exposes country’s reserves gap

Fuel pump prices around Kampala and surrounding areas are expected to “stabilise” over the next two days as customs officials at the Uganda-Kenya border clear more trailers into the country, the Energy ministry said yesterday.

 On Saturday, the Health ministry temporarily suspended a controversial mandatory border Covid-19 retesting plan for cargo truck drivers entering the country. On January 7, Cabinet had decreed mandatory testing for incoming travellers at all high-volume points of entry, including land borders.

 The decision prompted protests by truck drivers opposed to double-testing for Covid-19 on both sides of the border, forcing unprecedented congestion of cargo on the country’s main route to the coast, including fuel imports.

It led to a sharp rise in fuel pump prices from around Shs4,000 per litre to between Shs5,000 and Shs7,000 per litre within days. Several fuel stations had run out of stock by yesterday, while in some parts of the country, the price soared past Shs10,000 per litre.

 The truck drivers’ protest over Covid-19 testing was compounded by the breakdown of the Uganda Revenue Authority (URA) cargo scanner at Malaba. URA said the scanner malfunctioned on Saturday morning, forcing the tax authorities to bring a mobile scanner ordinarily used at Elegu border with South Sudan. The switch allowed URA to clear some 978 trucks by yesterday.

 Despite the suspension of the mandatory Covid-19 testing requirement at Malaba and Busia borders, traffic remained heavy and some drivers opted to park their trucks.

 Truck drivers that Daily Monitor talked to blamed the mess on the “slow working pace” of URA staff.

Mr Ibrahim Nauhendo, a fuel tank driver, said some border staff prefer working at night and this has frustrated them from travelling during daytime.

 On Sunday, at least 200 fuel tankers were cleared up from the 105 and 115 trucks cleared on Friday and Saturday.

 Fuel pump prices have been rising since last year as the world price of crude oil rose with the lifting of movement restrictions in many parts of the globe. The current sudden rise has coincided with a reopening of schools and an expected reopening of the night economy, putting pressure on consumers.

Rising fuel pump prices also lead to increases in the price of transport and food, and are expected to trigger inflation, at least in the short term.

 Fuel dealers warned yesterday that while supplies should improve as new stock came into the country, prices will stay higher than usual for at least a fortnight as they dispose of fuel stocks bought at above-market prices.   Uganda’s average daily consumption for petroleum products stands at 6.5 million litres. Most of this is hauled in by trucks and six out of every 10 litres are consumed in Kampala Metropolitan area.

 About 90 percent of Uganda’s petroleum imports are routed through Kenya and only 10 percent through Tanzania.

 Energy minister Ruth Nankabirwa told journalists on Sunday that while her ministry’s role is to regulate the downstream arm (supply of petroleum products), the crisis at hand—administrative glitches—is beyond its control.

 “What I can say is to call upon the dealers not to cheat Ugandans on the premise of demand and supply dynamics,” Ms Nankabirwa said.

 The crisis at hand has, however, yet again thrust into sharp focus the fragilities facing the country regarding transport and storage of petroleum products.

 The two dominant retail dealers Total Energies and Vivo Energy do not maintain large enough supply stocks to cover prolonged shortages, partly because their storage terminals are located within the heart of the capital.

 With a heated election season kicking off next door in Kenya, the Ministry of Energy officials are working on a paper to be tabled before Cabinet detailing stocking of the country’s fuel reserves.

 Earlier plans to construct a pipeline for finished petroleum products from Kenya to Uganda to guarantee steady flow and avoid any such logistical nightmares entered into headwinds, including opposition by the fuel trucks business owners.

 The national fuel reserves in Jinja operated by the Uganda National Oil Company (Unoc) with plant capacity of 30 million litres are seldom stocked. The reserves, that are supposed to serve as a buffer during crunch times, currently hold only seven million litres.

 Unoc officials cite logistical and financial challenges for failure to stock up the reserves from around 2020. Initially, the body planned a weekly shipment of around three million litres of petroleum products on barges via Lake Victoria—with an eye on neighbouring landlocked countries—but officials say due to several limitations, including the barges hauling other cargo, the plan was set back.

 Unoc is the statutory body mandated to, among others, handle the country’s commercial interests in the oil sector, and propose new investments in upstream and downstream, including bulk supply, locally, regionally and internationally.

 With Uganda nursing ambitions to construct a refinery, the government through Unoc is developing the Kampala Storage Terminal of 320 million litres outside Wakiso District which will act as a depot for refined products from Hoima. Development of both the refinery and new terminal is still at the planning stages.

There are other efforts by private actors—Mahathi Infra, supported by both the Ugandan and Kenyan governments, to haul petroleum products via Lake Victoria. The company is putting up storage tanks at Bukasa and Bugiri, but these efforts remain in the works.

 This leaves the country highly vulnerable to shocks of fuel shortages whenever a crisis arises. The current rise in fuel prices started in 2020, when the country imposed the first lockdown to contain spread of the Covid-19, which the retail suppliers blamed on a glitch in the international supply system including disruption of crude oil production.

 According to the ministry of Energy, there are more than 100 fuel retailers in the country.

By Frederic Musisi, Dorothy Nakaweesi, & Joseph Omolo

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