It’s too expensive to drive a car in Uganda

“The charge for the journey is Ugx. 1,500,” a taxi conductor shouted as he tagged a departing passenger’s pants. The victim had only paid Ugx. 1,000 like he usually did the previous year. They argued for a while until the conductor pointed at the nearest fuel station, a litre of petrol going for as high as Ugx. 3,800 while that of diesel at Ugx. 3280. Outrageous!!

Petrol prices in 2018 have averaged Ugx. 3,800 and diesel Ugx,3280, higher than the average value of the whole of 2017 which was just about Ugx. 3,350 and Ugx.3070 respectively. That’s more than a 13 percent increment in price for petrol and diesel respectively. This goes beyond the spending potential of most Ugandans. But what forces are pushing the price of oil to rise rapidly?

Global oil price turmoil has been caused mainly by the instabilities in Saudi Arabia that have seen a number of corrupt officials persecuted by the crown prince and others are undergoing investigation. In November 2017, Saudi ministry of energy officials announced that up to 120,000 barrels per day were to be cut from the supply chain. But Saudi cuts are not the only powers behind this price.

All oil producing countries under the Organisation of Petroleum Exporting Countries (OPEC) have spearheaded the cause. Even Russia complied with the crude output cuts which will see the price surge over and above the US$70.00 (Ugx. 252,000) per barrel mark by June 2018. OPEC agreed to extend production cuts through 2018 with a target price of between US$70-US$80 a barrel. They want to push the price high without necessarily surpassing these ceilings.

Summit Business Analytics’ two-month analysis of the crude market shows that the price of oil has increased by only 12 percent to US$61.66 (Ugx. 225,059) per barrel from the US$59.93 (Ugx. 215,760) reported in the thirty-day analysis previously. While our year on year analysis shows global oil prices have increased by a massive 18 percent. In just two months, Uganda’s petrol prices have surged by 13 percent and 7 per cent for diesel.

Policy analysts have cited increased tariffs, use of longer routes, increased oil processing prices, the weakening shilling as reasons for the extra variation

in pricing. However, SB’s argument is more of a long term outcry by the locals.

Let’s take you as far back as early 2016 when the oil price was plunging flamboyantly. Global oil prices hit average lows of just about US$22.48 (Ugx. 80,928) per barrel. This was good news for non-oil producing countries’ locals who saw concurrent drops in their fuel prices except for Uganda. Uganda’s drops were either negligible or the fuel stations maintained their previous pricing which averaged Ugx. 3,350 – What a shame!

We have seen politicians raise this issue on many an occasion but their uproar quickly fades after their campaigns. People are less interested in these contemporary economic issues but rather a change of government or party. Most politicians tend to drive their attention away from these issues concentrating on other flaws of the government. Yet this continues to suck into the pocket of even the lowest income earners.

While middle and high income earners are faced with challenges of fueling their cars, the lower income groups are more affected by the charges bestowed unto them by the public means of transport, food prices up surging consequent to fuel price rise and other related struggles.

This current rise in global oil prices should be the last thing that should raise fuel prices in Uganda to Ugx. 3,850 a litre. “We expected a correction in Uganda’s fuel prices when we heard about the rising oil prices,” says Francis, a business analyst at Summit Consulting. “These petrol stations should be fair to Ugandans. They

did not reduce price significantly during oil recessions but have quickly increased price in the subsequent oil boom by a multitude.”

To be fair to Ugandans, fuel stations should have stabilized the pricing within the Ugx. 3,400-mark correcting the previous variations during the recessionary times. However, these were ignored by these greedy multi-national companies and generally the regulators. None of these have stepped up their efforts in reducing this price or matching it with international variations at least slightly. Let the upper limit not be too up. These variations are obscene.

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