Fuel prices increase further

Kampala. Fuel prices have moved northwards, with petrol closing yesterday at an average of Shs4,400.
The prices have been increasing since January with no sign of coming down, even as factors that are blamed for influencing the movements stabilise.

In January and other subsequent months, dealers blamed the movement of the dollar, tax amendments, international prices and repairs on the Mombasa-Nairobi pipeline for the increase in fuel prices.
However, the repairs have since been completed and the dollar has stabilised yet prices continue moving northwards.

By yesterday, a litre of petrol had increased by an average of Shs400 while diesel by Shs450 since the beginning of the year, indicating a 9 per cent and 10 per cent increase, respectively.
Currently, a litre of petrol is going for Shs4,400 while diesel is selling at 4,140.

Mr Olivier Gatera, the Kobil country manager, yesterday told Daily Monitor the current increase has been influenced by international prices in the months of September and October.
“This is the reason for local pump prices going up,” he said, noting that Brent - a major trading classification for crude oil has increased to $78.89$ a barrel.

Mr Peter Ochieng, the Hashi Energy managing director, yesterday said three factors, including the exchange rate regime, international price and the Shs100 Excise Duty have been the main reasons for the movement of fuel prices since January.
Of all the three factors, foreign exchange has been the most volatile but has since July stabilised to an average of Shs3,740.

“On average, the shilling has been weaker compared to last year and this [has] played a big role in the prices of fuel for the period between January and November,” Mr Ochieng said.
However, he noted that during the period between January and November, international prices have played a subtle role in the movements.

For instance, he said, a metric tonne of petrol in January was priced at an average of $644.534 yet it had by September risen to $717.663 per metric tonne.
However, the price has since fallen to $607 by the beginning of November.

“The product being sold in the region was delivered in October which was bought expensively,” Mr Ochieng said, noting that prices are likely to reduce in due course. However, diesel has increased more than petrol over the period.
“The price of diesel has gone up more than petrol,” Mr Ochieng said, adding that international trends are showing signs of relaxing.

At the beginning of November, the average price of a metric tonne of diesel had dropped to $646.
Analysts have indicated that fuel prices will increase and could worsen towards the festive season.

Impact on economy
According to Dr Fred Muhumuza, an economics lecturer at Makerere University, the increase in fuel prices will lower aggregate demand as prices of goods increase.
“Fuel is a major component and this is likely to affect the exchange rate as well as transport costs,” he says.

Experts say the immediate effect will feed into commodity prices which are likely to drive inflation high.
“High fuel costs will result into high cost of doing business. A farmer spends about 22 per cent to transport produce. This will automatically impact the final price of the commodity and thus increase in inflation,” Mr Gideon Badagawa, Private Sector Foundation Uganda executive director says.

Petrol trends
Month Amount
January Shs4,000
April Shs4,100
July Shs4,230
October Shs4,380
November Shs4,400

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