Paul Amoru
11 October 2008
Kampala — Motorists in Uganda are reaping dividends of the rapid fall in world oil prices but oil companies in the country warn the honeymoon could be short-lived as fluctuation in exchange rates could once again push up the pump rates.
The price of petrol and diesel have, in the past month, dropped by Shs200 per litre, granting temporary relief to hard-up consumers already struggling with dramatic rise in domestic food prices.
Saturday Monitor, in a mini survey carried out on Thursday found that a litre of petrol at Gapco Jinja Road station was selling at Shs2, 540 and Shs2, 400 for diesel. Total Jinja Road sold petrol at Shs2, 550 and diesel at Shs2450 while petrol was trading at the same rate at Shell Jinja Road with diesel Shs30 lower at Shs2, 420.
The unexplained internal market distortions, manifested in disparate pump prices, echoed most at Caltex fuel station, Wampewo Avenue where clients were charged comparatively higher rates of Shs2, 590 for every litre of petrol and Shs2, 460 for diesel.
Fuel stations in city suburbs such as Nateete, Kireka and Ntinda were reported to be charging much lower rates, even as motorists demanded further price reduction for better relief.
"The change (in price of fuel) is still very small," Mr Aruna Ssempijja, a bodaboda rider, said. "We expect the price to come below Shs2, 000."
His colleague Bala Byekkubo complained of fuel stations in the city centre charging higher prices, hewing off profit margins for commercial users.
Fuel companies said the reduced pump prices had not yielded increased sale volumes for them, possibly because the growing inflation now at 15.2 per cent is forcing clients on fixed earnings to spend more to buy household necessities and draining the value of disposable income.
Mr Ivan Kyayonka, the country manager for Shell - Uganda, said the down-turn in major world economies, triggered by the credit crunch coupled with speculation is melting down both the global demand and prices of oil.
"The difficulty that the big world economies, especially the United Sates and the UK are going through is causing fluctuations in prices of petroleum products in the world market," he said.
Early this year, the price per barrel of oil spiralled over $150 mark, sparking fears of oil-induced economic crisis due to huge demands in emerging economies such as China and India but that price has now suddenly plunged to $90.
"Traders forecast that demand for oil is going to continue to be low and that influences prices since oil is a commodity in which people speculate," Mr Kyayonka said.
The General Manager of Kobil Oil Company, Mr Daniel Segal, said if the fall in oil prices persists, local petroleum companies would be able to cut prices of oil products further.
He, however, said if the Ugandan shilling continued weakening against the US dollar, it would make all imports, including fuel expensive, and the higher costs would be passed on consumers through increased pump rates.
"World oil is traded in US dollars, and when the Ugandan shilling depreciates, that means an importer would need more Uganda shillings to buy dollars, resulting in increased costs on imports," Mr Segal said.
The Ugandan Shilling is presently trading at 1, 670 to a dollar, appreciating as a result of growing market confidence after the Federal government agreed to avail $700 billion in an unprecedented bail out spending to buy troubled companies.
Earlier, Mr Peter Ochieng, Kobil's marketing and communications manager, said the margin of the price decrease in the local market would not necessarily match that of crude oil on the international market due to a mix of different factors.
"For instance, the cost of freight is shooting through the roof because ships pass through dangerous Somali waters that have pirates roaming all around," he said adding, "So, even if crude declined, the rising freight charges would still keep up local pump prices."
Uganda companies, strained by the tremendous energy costs, hiked prices of their products rousing an inflationary boil that heightened mid-year with Uganda Bureau of Statistics announcing that the annual headline inflation had leaped to 11 per cent.
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