Rising fuel prices: How Uganda can build lasting energy security
Uganda’s rising petrol and diesel prices are a reminder that the cost of energy affects far more than motorists. It determines how much farmers spend transporting produce, how much traders charge for goods, how much manufacturers pay to operate machinery and how much ordinary families spend on transport and food, writes Nkesiga Moses Kamiisi
Nkesiga Moses Kamiisi. (File)
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OPINION
By Nkesiga Moses Kamiisi
Uganda’s rising petrol and diesel prices are a reminder that the cost of energy affects far more than motorists. It determines how much farmers spend transporting produce, how much traders charge for goods, how much manufacturers pay to operate machinery and how much ordinary families spend on transport and food.
For a country pursuing industrialisation, job creation and higher household incomes, affordable and reliable energy is essential. Although Uganda cannot control every international oil price movement, it can take deliberate steps to reduce its vulnerability to external shocks.
The task before us is to protect livelihoods today while building a stronger, more self-reliant energy economy for tomorrow.
Why fuel prices are rising
Uganda depends heavily on imported refined petroleum products. Consequently, international price increases, geopolitical conflicts, shipping costs and disruptions along supply routes can quickly affect local pump prices.
The exchange rate adds another challenge. Because petroleum imports are largely paid for in US dollars, a weaker shilling means importers need more local currency to purchase the same quantity of fuel.
Domestic taxes also contribute to the final price. In Parliament on October 7, 2026, energy and mineral development minister Dr Monica Musenero identified international supply pressures, shilling depreciation and a sh200-per-litre excise duty increase introduced in the 2026/2027 financial year among the factors affecting fuel prices.
The scale of the pressure is reflected in official figures. Uganda’s average pump price for petrol rose from sh5,099 per litre in August 2025 to sh6,529 in August 2026 — an increase of about 28%. Diesel rose from sh4,733 to sh6,647 per litre over the same period, an increase of about 40%. These year-on-year comparisons illustrate how sharply fuel costs can change, although monthly averages do not mean every station charged the same price.
Other costs include freight, insurance, storage, financing and distribution.
These factors matter because a meaningful solution must examine the entire petroleum supply chain rather than assume that every price increase has the same cause.
Uganda’s position as a landlocked country creates additional transportation costs. Petroleum products must travel from coastal entry points, principally through regional infrastructure serving the ports of Mombasa in Kenya and Dar-es-Salaam in Tanzania, before reaching inland markets.
Five practical solutions
Government and the Uganda National Oil Company should regularly publish a clear breakdown of petroleum prices, including international product costs, exchange rates, taxes, freight, insurance, storage and distribution margins.
This would help Parliament and the public understand how the price at the pump is determined. It would also help identify avoidable costs and establish whether price adjustments reflect genuine changes in the market.
Transparency must be accompanied by effective regulatory oversight and fair competition. Where evidence reveals unjustified charges or anti-competitive conduct, the relevant authorities should act in accordance with the law.
2) Manage international price risks professionally
Uganda should assess whether the national oil company can use carefully controlled financial hedging arrangements to reduce exposure to sudden international price increases.
For example, a forward contract may lock in an agreed purchase price or pricing formula for a future delivery. An option can provide protection against adverse price movements while preserving some flexibility if prices fall. Both instruments have costs and risks, and neither guarantees cheaper fuel.
Any hedging programme should therefore be supported by specialist advice, clear risk limits, independent audits and public reporting. Its purpose must be to manage price volatility, not speculate with public resources.
The Government should also study the feasibility of a petroleum price-stabilisation fund. Such a fund could accumulate resources during favourable market conditions and provide limited, temporary support during exceptional price shocks.
Its rules must specify when support can be activated, how much can be spent and how the fund will be replenished. A transparent assessment should establish whether it offers better value than targeted tax relief or other temporary measures. Uganda should avoid open-ended subsidies that could weaken public finances.
3) Strengthen storage, transport and regional supply routes
Fuel security depends not only on purchasing petroleum, but also on storing and delivering it efficiently.
Uganda should continue developing strategic storage capacity so that temporary international disruptions do not immediately threaten domestic supplies. Reserves must have clear operating rules, adequate maintenance, proper stock rotation and transparent oversight.
Government reported in May 2026 that the Jinja Storage Terminal was being upgraded from 30 million litres to 40 million litres, while the Mahathi Infra Terminal on Lake Victoria had a stated capacity of 70 million litres. The planned Kampala Storage Terminal in Mpigi was expected to have a capacity of 320 million litres. These figures underline the scale of storage infrastructure relevant to national and regional supply security; planned capacity should not be confused with storage already operational.
Uganda’s cooperation with regional energy partners should support efficient transport, diversified supply routes and reliable access to petroleum products.
These investments require careful cost-benefit analysis, but better logistics can strengthen supply security and reduce avoidable expenses over time.
4) Turn domestic oil resources into lasting economic value
Uganda’s petroleum resources in the Albertine Graben offer an important opportunity to expand industrial production, employment and domestic value addition.
The planned refinery at Kabaale in Hoima district, with a proposed capacity of 60,000 barrels of crude oil per day, and its associated 211km products pipeline to a storage terminal in Mpigi are important components of the country’s long-term energy plans.
The Government should maintain strong technical oversight, transparent financing and clear implementation milestones for these projects.
However, domestic refining will not automatically guarantee cheaper fuel. The cost of crude oil, processing, financing, distribution and taxation will continue to matter. The benefits will depend on commercial viability, efficient operations and sound management.
The wider opportunity is to develop industries that use petroleum as an input, including petrochemicals, fertilisers and other manufactured products. This would allow Uganda to retain more value locally, create skilled jobs and expand its industrial base.
The ultimate measure of success should be the contribution these investments make to national productivity and citizens’ welfare.
5) Reduce unnecessary dependence on imported petroleum
Uganda should complement petroleum development with greater investment in renewable energy, efficient public transport and electric mobility where these options are affordable and commercially viable.
Electric motorcycles and commuter buses can gradually reduce petrol and diesel consumption, particularly in urban areas. Reliable electricity, appropriate financing, charging infrastructure and technical skills will be necessary to support this transition.
Better traffic management, vehicle maintenance and organised public transport can also reduce wasted fuel.
At the same time, Uganda must strengthen domestic production and exports. Competitive agriculture, agro-processing, manufacturing, tourism and mineral value addition can generate foreign exchange and create employment. Producing goods locally where it is economically sensible can also reduce unnecessary import demand.
These measures will not eliminate the need for imported fuel overnight. They will, however, help build an economy that is better equipped to withstand international price shocks.
The writer is the NRM chairperson, Kiruhura district and holds a master’s of laws in oil and gas