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Government projects uniform fuel prices by December
Reduction of fuel prices among big brands compared to small operators has been slow. Photo / Edgar R Batte
What you need to know:
- Government says the reduction of fuel prices has been slow among big brands because they are still clearing old stock bought before UNOC took over as sole importer and supplier of oil and related products
Government has said it expects fuel prices to be uniform or have slight variances in about three months, a key discussion point since government took over as the sole importer and supplier of oil products.
Responding to Monitor inquiries regarding the slow reduction in fuel costs among big brands and price variances yet the products are sourced from a single supplier, Energy State Minister Sidronius Okaasai Opolot, said many of the big operators had stocked fuel before government took over the role, noting that after the stocks have been exhausted in about three months, pump prices will almost be uniform or have small variances.
“Give it three months and the impact will be realized across the board. The small ones will be able to compete. Maybe there will be a small variance in prices because of brand and operational costs but it won't be as big as it has been,” he said.
However, he noted, price reductions among small operators had been registered, even as big operators such as Shell and Total E&P still price petrol at an average of Shs5,185, while diesel is priced at Shs4,950.
Mr Tony Otoa, the Uganda National Oil Company (UNOC) chief corporate affairs officer, on Tuesday said the cost of fuel products among small dealers had dropped to Shs5,000 and Shs4,600 or below for petrol and diesel, respectively since June when government became the sole importer and supplier.
He also said that government, through UNOC, has since June ensured that petroleum products reach local oil marketing companies at the most competitive prices, thus achieving modest prices compared to regional peers.
“Prices are the lowest in the region. We are the lowest despite the logistical hurdles. And the fact that we are landlocked,” Mr Otoa said.
However, details from GlobalPetroPrices.com, which tracks daily price movements for energy and petroleum products across the globe, indicate that Uganda still has higher fuel prices compared to Tanzania and Rwanda, but relatively lower than Kenya’s.
In Tanzania and Rwanda, petrol costs Shs4,256 and Shs4,496.5, respectively compared to Shs5,153 in Uganda and Shs5,356 in Kenya, while diesel in Uganda costs an average of Shs4,950, Shs4,878 in Kenya, Shs4,546 in Rwanda and Shs4,077 in Tanzania.
However, the three countries issue fuel subsidies to insulate price shocks.
In July, government imported its first consignment of oil products in a move that eliminated middlemen, who for long had been blamed for escalating pump prices in Uganda.
Government had before indicated that fuel prices, under the new arrangement, would reduce to under Shs5,000, but this has been slow to be achieved with some consumers wondering why fuel stations continued to quote different prices - at times with big margins - yet they were all sourcing from a single supplier.
However, Dr Okaasai said there was need for patience for the market to self-collect, urging Ugandans to be positive about the arrangement because it seeks to reduce fuel prices and improve quality.
“If we are supplying all oil marketing companies, it means we are supplying uniform products. I want to remove the notion that small companies are selling poor-quality products. This will create competition between big and small companies and eventually, the price will come down. Right now, companies are still clearing the old stock and we have got to accept this lapse so that people don't lose money they invested,” he said.
Dr Okaasai also noted that it was difficult to point at a particular price that government would desire fuel to be sold at going forward, noting that prices routinely change because of international fundamentals, but indicated that since government had removed middlemen, it was easier to price fuel favorably, which would allow UNOC to make some money without exploiting consumers.
“As government, we can influence what cap UNOC will use and it will be pro-people. Again, we want UNOC to distribute fuel to filling stations so that we can manage quality and UNOC doesn't have to operate and make abnormal profits,” he said.
