What should be done to solve the persistent fuel crisis in Uganda?

by Abbas Muhamad
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Last year in Uganda, fuel prices for a litre of petrol went up by between Shs 100-Shs 630 and Shs 60-Shs 200 for a litre of diesel, with the highest spike margins reported in Rukungiri and Bushenyi districts, which are about 380 and 320 kilometres from the capital, Kampala, respectively.

This time, the residents in Hoima felt the pinch of skyrocketing fuel prices because its supply in the country has been affected by a strike at the Kenya-Uganda border, at which truck drivers protested the high charges for Covid-19 tests.

The fuel supply was normal, with trucks being cleared as usual, and drivers were allowed to present negative Covid-19 results from Kenya until January 1 2022, when a directive was issued requiring all truck drivers to undergo testing at Malaba and Busia entry points.

This resulted in a buildup of trucks as none were entering the country.

Currently, fuel prices have risen to Shs 10,000 for a litre of petrol, from Sh4, 590 while diesel prices went as high as shs 7,000.

In Kampala, petrol is now selling between Shs 5,000 and Shs 10,000 a litre. The price of fuel shot up responding to the increase in the global fuel prices in August 2021.

The situation has piled more pressure on Ugandans as motorists queue up at the few fuel stations that have now started doubling the price for a litre of fuel.

The skyrocketing prices have also sparked off panic among Ugandan passenger service providers because the rise in fuel prices means, increasing fares and losing customers or stay put and plunge into losses.

Although the Prime Minister Robinah Nabbanja reassured the country that fuel supplies will be restored to normal soon, this did not stop fuel prices going up.

The government is aware of the public concerns about rising fuel prices, but I would like to assure the country that we are not in a crisis. The hiccup at Malaba border was fixed. Prices should stabilize and fuel dealers should not use this excuse to hike prices,” she said.

The situation is becoming more tense each day as most fuel stations reported that they had run out of fuel forcing the prices to escalate further.

Fred Muhumuza, an economist and a lecturer at Makerere University says this situation is mostly likely to affect the low income households that cannot afford the transport means as such people should be responsible.

“If you think it has reached a level that is really impacting you, you may take a day or two and watch the space, but for most people, an increase of Shs 300 or Shs 500 is not going to affect them, especially when it has been gradually increasing for over the last three months,” says Muhumuza.

Uganda is a net importer of petroleum products in a liberalized downstream petroleum market with an average current daily consumption of 6.5 million litres.

Uganda loads its products through the terminals located in Eldoret, Kisumu, Nairobi and Mombasa, and supply is majorly through road transport.

Prof Augustus Nuwagaba, an economic expert says that fuel prices are being affected by three factors, including the disruption in the supply, the resurgence of global demand because the fuel prices have increased.

“It is not only in Uganda. In the US, it has increased by $120, meaning that the barrel is $80.In East Africa I think the highest is in Kenya, followed by Uganda, the lowest in Tanzania, it is not a Ugandan phenomenon,” said Nuwagaba.

Another factor that has led to increase in fuel prices, according to Nuwagaba is tax regime where some countries have increased taxes on fuel.

“This is a challenge and we need reserves. We need to cushion the economy against shock. We need shocks in the oil and agricultural sectors and in a quite a number of sectors, not only in oil. The government needs to understand the importance of cushioning against shocks,” he says.

Following the failure to maintain replenishment of stocks and where trucks had spent 10 days in the queue, the turnaround time was affected and reduced stocks for petroleum products in the country.

As of January 12, 2022, the Ministry of Health commenced free Covid-19 testing at the Malaba and Busia border points and the trucks started moving and the pace of the truck movement started improving.

With the full opening of economic activities, there has been an increase in uptake of petroleum products, which saw a spike in consumption in the country that affected the 10-day stock levels.

The very low replenishment based on the truck delays at the border resulted in some stock out of petrol at some outlets, according to experts.

The Secretary to the Treasury, Ramathan Ggoobi while expressing the cause of the hiked prices says that all responsible parties are working around the clock to bring the prices down.

He said that the increased prices have nothing to do with economics, but stem from a global shock emanating from administrative policies during the Covid-19 pandemic.

“The current spike in fuel prices has nothing to do with economics. It was caused by a temporary exogenous shock caused by administrative decisions to control the spread of Covid-19, here and globally. The responsible parties are addressing them,” he explains.

 “Soon the fuel prices will settle back to market-clearing equilibrium,” he added.

The Principal Communications Officer of the Ministry of Energy, Solomon Muyita, asks Ugandans to avoid unnecessary journeys and carry out proper route plans to manage their fuel consumption.

He says the government designates specific lanes to allow trucks carrying fuel to reach early and address the supply shocks fueling the spike in pump prices.

According to Muyita, Uganda’s Oil marketing companies have most of their trucks in traffic between the Kenya loading points and the borders, and once cleared in a few days, supply and prices will return to normal, and there is no need for the public to panic.

“Speculators hoarding petroleum products and leading to an unnecessary hike in fuel prices are advised to desist from this bad practice. The price of petrol in the country should not exceed Shs 5,000 per litre, ”he warns.

The cases of scarcity in districts such as Hoima, Muyita explains the situation will be addressed shortly with the ongoing replenishment.


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