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‘Hike in fuel prices expected soon’

By Vision Reporter

Added 15th October 2009 03:00 AM

FUEL prices are expected to rise soon as the Kenya Petroleum Refineries Company increases crude oil processing charges.

FUEL prices are expected to rise soon as the Kenya Petroleum Refineries Company increases crude oil processing charges.

By Ibrahim Kasita

FUEL prices are expected to rise soon as the Kenya Petroleum Refineries Company increases crude oil processing charges.

The firm applied to the Kenya’s Energy Regulatory Commission for a rise in processing fee to $3.50 (about sh6,738), up from the $2.30 (sh4,428) a barrel. The increase, it said, was “to cover rising operational costs and to raise money to upgrade its operations in the next five years.”

When tariff proposals are approved, the new charges will take effect next month.

“Definitely, the increment will be transferred and reflected in the pump prices,” Stephen Barisagara, a Ugandan senior energy officer, said.

The price adjustment is also expected to push up prices of petroleum products across the board, including kerosene, diesel, petrol and cooking gas.

“Pump prices of different fuel products will go up.”

Currently, petrol is sold at sh2,450 a litre, diesel sh2,080, while kerosene is at sh1,700.

This development means that Ugandan consumers will continue to dig deeper into their pockets to meet their fuel needs. This is expected to also spark off a new wave of inflationary pressure across all sectors in the economy.

Energy and food prices have been the main drivers of inflation in Uganda over the past four years. This was due to the drought that pushed up food prices and reduced hydro-power production.

As a result, the Government was forced to rely on expensive thermal power to meet the energy demands.

According to the 2009 statistical abstract report by the Uganda Bureau of Statistics, the trend in fuel sales has shown large increases because of both public and private generators supplementing power shortage.

Presently, there are three thermal diesel-powered generators with a capacity to to produce 150MW. They are said to consume over 800 litres of diesel per day.

“We have not yet computed the impact of the adjustment on the tariffs. But they will definately impact on the fuel logistics costs, which is a component in the computation of the tariff,” Frank Sebbowa, the Electricity Regulatory Authority chief executive officer, said.

“However, this will not have an effect on the end-user tariffs because that component is covered by the Government subsidy.”

The drastic move to increase the crude oil refining prices will motivate Uganda to start refining its own oil after the discovery of significant commercially-viable crude oil under Lake Albert.

The first commercial oil production is expected in 2011, though the peak-flow of 150,000 barrels for up to 25 years, may only be reached by 2015. Having oil refined locally would ensure that a greater share of the profits remains in country and also end reliance on Kenya’s Mombasa port for imported fuel products.

Some of the oil will be used for power production, but the bulk will be sold domestically and regionally.

Besides high fuel prices, Uganda suffers acute fuel shortages whenever there is a disruption in the supply line from Kenya.

Over the last five years, the country has suffered shortages, the recent ones beingin December 2007, January, March, April and June this year.

The country relies on oil firms, whose limited facilities can hardly store fuel to last the country 10 days.

Uganda consumes 2.2 million litres daily and demand grows by 7% annually.

‘Hike in fuel prices expected soon’

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