Weak shilling pushes fuel prices up
May 16, 2010
THE weak shilling is to blame for the high fuel pump prices, a top industry player said over the weekend.
By Godfrey Kimono
THE weak shilling is to blame for the high fuel pump prices, a top industry player said over the weekend.
He explained that the two factors had compelled fuel dealers to increase oil prices, swelling commodity costs.
Ngom Mamdon, the TOTAL Uganda managing director, pointed out that the strong dollar affected the retail tariffs despite the steady supply of the product into the country.
“The appreciation of the dollar means the value of the shillings goes down. This means fuel dealers pay a higher cost to import fuel to Uganda,†Mamdon explained. He was speaking at the launch of the TOTAL clean-up week at their Namasuba filling station.
Meanwhile, Chris Kiwawulo adds that pump fuel prices are expected to go up again following the rise in world oil prices and the high dollar rate against the shilling, dealers warned.
When the dollar started appreciating against the shilling at the beginning of March, local pump prices also went up hitting the sh3, 000-mark in April.
However, unlike in previous fuel hikes where petrol prices rise more than that of diesel and kerosene, this time round the price increase is largely expected to affect diesel more than any other product, Daniel Segal, the head of Kobil Uganda, predicted.
The price of a litre of diesel sells at sh2,340. Diesel is the most used oil product in Uganda with 1,585,000 litres consumed daily.
The country consumes 940,000 litres of petrol and 170,000 of kerosene daily.
Diesel consumption beats that of petrol because it is used to run heavy machinery like power generators, road construction machines and heavy trucks as well as public transport vehicles like taxis. Segal noted that since the shilling became weaker against the dollar in March, it has been fluctuating.
“We pay for our products in dollars yet we sell fuel in shillings. This means we have to collect more shillings to stay in business and thereby increasing prices to match the dollar rate against the shilling,†Segal explained.
At the beginning of the year, the dollar was trading at about sh1,900.
But by March it had gone above sh2,000-mark. It currently trades at between sh2,130/sh2,145for buying and selling respectively.
Like Segal, the national oil dealers’ chairman, Rajni Tailor, also attributed the rising fuel prices to fluctuating world prices and the dollar rate. Because of the fluctuations, Tailor argued, dealers are not willing to stock fuel for fear of making losses.
“Whatever is coming in is dependant on the current international prices and the dollar rate,†Tailor, who also runs a Gapco filling station stated.
The international crude oil prices that stood at $76.96 a barrel early last week, have since April fluctuated between $75 to $82 per barrel.
Besides the international prices and dollar rate, the extra cost of $26,000 charged per vessel against piracy and the taxes levied by the Government on each litre of oil (sh800 on petrol, sh400 on diesel) also push fuel prices up.
Without oil reserves therefore, Uganda will continue to suffer fuel shortages and high prices every time there is a crisis since the energy ministry is yet to refurbish the reserves in Jinja.
The strategic reserves built in the 1970s with a capacity of 20 million litres of diesel and 10 million litres of petrol, are not functioning
THE weak shilling is to blame for the high fuel pump prices, a top industry player said over the weekend.
He explained that the two factors had compelled fuel dealers to increase oil prices, swelling commodity costs.
Ngom Mamdon, the TOTAL Uganda managing director, pointed out that the strong dollar affected the retail tariffs despite the steady supply of the product into the country.
“The appreciation of the dollar means the value of the shillings goes down. This means fuel dealers pay a higher cost to import fuel to Uganda,†Mamdon explained. He was speaking at the launch of the TOTAL clean-up week at their Namasuba filling station.
Meanwhile, Chris Kiwawulo adds that pump fuel prices are expected to go up again following the rise in world oil prices and the high dollar rate against the shilling, dealers warned.
When the dollar started appreciating against the shilling at the beginning of March, local pump prices also went up hitting the sh3, 000-mark in April.
However, unlike in previous fuel hikes where petrol prices rise more than that of diesel and kerosene, this time round the price increase is largely expected to affect diesel more than any other product, Daniel Segal, the head of Kobil Uganda, predicted.
The price of a litre of diesel sells at sh2,340. Diesel is the most used oil product in Uganda with 1,585,000 litres consumed daily.
The country consumes 940,000 litres of petrol and 170,000 of kerosene daily.
Diesel consumption beats that of petrol because it is used to run heavy machinery like power generators, road construction machines and heavy trucks as well as public transport vehicles like taxis. Segal noted that since the shilling became weaker against the dollar in March, it has been fluctuating.
“We pay for our products in dollars yet we sell fuel in shillings. This means we have to collect more shillings to stay in business and thereby increasing prices to match the dollar rate against the shilling,†Segal explained.
At the beginning of the year, the dollar was trading at about sh1,900.
But by March it had gone above sh2,000-mark. It currently trades at between sh2,130/sh2,145for buying and selling respectively.
Like Segal, the national oil dealers’ chairman, Rajni Tailor, also attributed the rising fuel prices to fluctuating world prices and the dollar rate. Because of the fluctuations, Tailor argued, dealers are not willing to stock fuel for fear of making losses.
“Whatever is coming in is dependant on the current international prices and the dollar rate,†Tailor, who also runs a Gapco filling station stated.
The international crude oil prices that stood at $76.96 a barrel early last week, have since April fluctuated between $75 to $82 per barrel.
Besides the international prices and dollar rate, the extra cost of $26,000 charged per vessel against piracy and the taxes levied by the Government on each litre of oil (sh800 on petrol, sh400 on diesel) also push fuel prices up.
Without oil reserves therefore, Uganda will continue to suffer fuel shortages and high prices every time there is a crisis since the energy ministry is yet to refurbish the reserves in Jinja.
The strategic reserves built in the 1970s with a capacity of 20 million litres of diesel and 10 million litres of petrol, are not functioning