Why fuel prices remain high despite border clearance

Stakeholders in the fuel sector have issued contradictory statements about the cause of the persisting high fuel prices across the country, despite the clearance of the supply chokepoint at Malaba border.

Three weeks ago, the country suffered an unprecedented hike in  fuel prices blamed on a strike by truck drivers protesting compulsory Covid-19 testing at the Uganda-Kenya border. This is said to have cut off fuel supply to Uganda as trucks jammed the border, leading to a shortage that saw prices double.

But even with the flow of traffic and supply now eased, a litre of petrol is retailing at about Shs5,000, up from an average of Shs4,450 in December, representing a  12.4 percentage point increase in less than a month.

Whereas the Ministry of Energy and Mineral Development says the persisting high prices are due to the spillover effects of the border impasse, and will go down soon, some retailers say the prices may stay up longer, or soar again.

 Mr Gilbert Otim, the spokesperson for oil and gas marketing firm Stabex, told Sunday Monitor that the current prices are due to global rise in price of crude oil as well as an increase in transport costs from the ports.

“It [border crisis] just escalated them. It is largely attributed to the high cost of fuel from the shipping in, forcing freight costs upwards. The price of crude oil has gone up, so we have little influence as companies on the ground to mitigate the crisis,” he said.

“There are a lot of things put together that cause the high prices. Prices hit an all-time high in the US last year and that is what has trickled down here…I am fearing for the worse ahead,” he added. 

Mr Otim says world politics, affecting big oil producers like the Russia-Ukraine impasse, sanctions on Iran, and episodes of insecurity in UAE have also affected the flow of petroleum products.

Two weeks ago, it was reported that the price of crude oil had hit an all-time high since 2014, with the price of a barrel notching $100 (about Shs349,000). Representatives of OPEC met on February 2 to discuss the imminent crisis.

 “The prices of the product are not determined by us. Consider two factors, the government and the nature of the economy we have. The ministry is best placed to give you an explanation. The supply issue is also under the ministry. The regulations determine the supply, and the ministry is in-charge of that,” Mr Ivan Muzahuzi, the corporate communications officer of  TotalEnergies, said.

An increase in fuel prices is a sure trigger for a hike in prices of general goods and services such as transport and consequently,  a high cost of living. 

Members of Parliament on Thursday said the border crisis alone is not responsible for the persisting high prices, and argued that the fuel companies have simply taken advantage of the situation.

A report by the Parliament’s Committee on Trade, Tourism and Industry on the fuel crisis indicates that the fuel received last month is sufficient to have prices return to normal.

Statistics indicate that the Uganda Revenue Authority (URA) cleared on average 126 trucks per day, more than the daily average of 122 fuel trucks cleared per day in December and preceding months.

“With these statistics it is clear that fuel is actually getting into the country but some fuel importing companies and fuel stations are taking advantage of the current situation to hoard and sell the fuel expensively,” the report states.

The report also shows that 12 importers brought in more than 100 million  litres of fuel in 22 days of January. Uganda consumes 6.5 million litres a day.  Oil marketing companies are also obligated to keep the 10 days’ operational stock as required by the Petroleum Supply Act of 2003.

Mr Ibrahim Bbosa, the URA spokesperson, told Sunday Monitor that the backlog at the border was long cleared, and traffic flow is back to normal.

The MPs also questioned why the fuel prices are higher than in other inland countries with transit routes through Uganda. 

A litre of fuel in Rwanda costs Shs4,200.

In a statement to Parliament, the Ministry of Energy and Mineral Development made no mention of any other underlying factors, and insists on the impact of the border strike.

“Due to the fact that pump prices are determined by the market, the price of diesel, which is available, has remained stable while petrol that is scarce, has forced some retailers to buy from other retailers that have petrol to resell at pump prices and consequently those secondary retailers sell at high prices to recoup the money that is invested in buying at pump prices together with the associated handling costs,” the statement reads.

The ministry anticipates that prices will return to normal five days from today, or they will consider invoking the minister’s power to regulate the industry as per Article 30 of the Petroleum Supply Act, 2003.

“The high pump prices of petroleum products are caused by product scarcity and once supply returns to normal, prices will become competitive again. Supply together with pump prices should return to normal by February 10,” the statement reads.

In an earlier statement, the ministry advised the public not to buy fuel above Shs5,000, which a section of the public say inadvertently set the price that the retailers have stuck to.

“That time the message was intended to help the consumer not to be exploited. Some could be hiding behind the guidance of the minister. But we are telling them to go back to where we were in November,” Mr Solomon Muyita, the Energy ministry spokesperson, said.

Whereas there has been a gradual increase in prices since Septembers 2021, the Shs5,500 jump has left Ugandans on edge.

There has been heated debate and responses from the public, especially on social media,  regarding the high fuel prices with some expressing worry  that the prices may not stablise.

“So we have normalised the Shs5,000 fuel price,” Ms Grace Ntabalo tweeted.  

“Fuel prices in Uganda never go down. They keep increasing. We never ask why, we just move on like we are not hurting…,” Miss Muhindo tweeted.

Issue

Mr Gilbert Otim, the spokesperson for oil and gas marketing firm Stabex, told Sunday Monitor that the current prices are due to global rise in price of crude oil as well as an increase in transport costs from the ports.

Two weeks ago, it was reported that the price of crude oil had hit an all-time high since 2014, with the price of a barrel notching $100 (about Shs349,000). Representatives of OPEC met on February 2 to discuss the imminent crisis.

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