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Worry in Uganda as fuel prices shoot up twice in four days

Attendants refuel a car at a petrol station in Kampala. The current high fuel prices are attributed to the dynamics of the international oil market.

Since December 2020, global crude oil prices have risen from $49.99 (about USh181,000) to $65.41 (USh236,000) per barrel as of last month, according to Statista, a German company specialising in market and consumer data.

Locally, a litre of petrol is currently trading at USh4,150, up from USh4,050, and diesel costs USh3,710, up from USh3,630.At the moment, the government says it has no control over the prices since they are dictated by the international market. Petroleum Supply and Distribution commissioner, Rev Frank Tukwasibwe, noted that the increase in fuel prices has nothing to do with the government’s taxation policy.

“The problem is that the price of crude oil has been rising, affecting [local] prices. We cannot do anything about that because we do not have local production here,” he said. Rev Tukwasibwe added that the government can be faulted for price increases if there are supply shortages, but that this is not the case.

Reactions

In their reactions to the price changes, industry players said they can have a negative effect on Uganda’s economy by causing inflation. “Every time fuel prices go up, [there is] a negative ripple effect on various sectors of the economy, oftentime to the detriment of the consumer,” Mr Dan Marlone Nabutsabi, the chief executive of Uganda Consumer Action Network (U-CAN), said in a statement.

“Food prices are not spared either. Even government agencies such as the Electricity Regulatory Authority [use fuel prices, among other factors] to determine the electricity tariff. All this, if not quickly checked by the government, may result in inflation,” he added.

Mr Peter Onasis Ochieng, an industry expert, told Daily Monitor on Thursday that as long as Uganda and other countries in the region continue to rely on imported refined petroleum products, they will have to contend with such changes in prices. “Until a cheaper means of transport is found, the cost of transporting fuel from the port of Mombasa in Kenya or, from the port of Tanga in Tanzania, will continue to influence the cost of pump prices,” he said.

Mr Ochieng added that the exchange rate factor also plays a big role in determining the pump price changes. He said that in Uganda’s case, this is always fuelled by the fluctuation of the shilling against the US dollar. He attributed this particular increase to the cost of imported refined products in the international market.

Economic impact

Mr Daniel Birungi, executive director of the Uganda Manufacturers Association, said the increase in pump prices only complicates the already dire economic situation.

“Many of our members transport their raw materials from the port by road. The increase in fuel prices will definitely increase the cost of doing business at a time when the Covid-19 pandemic has drained businesses,” he said.

If the trend continues, Mr Birungi said, they expect a buffer from the government in terms of a friendly tax structure as they can no longer pass the cost to consumers, considering they have also been hit by the pandemic.

Mr Yunus Kiggundu, chairperson of the United Bus Drivers Association, said the last resort will be to suspend operations because they cannot make transport costs any higher. – nation.co.ke