Elias Biryabarema
22 October 2008
Kampala — Petroleum prices in international markets have plummeted headlong, with a barrel reported on Friday to have bottomed below $70, a record drop from a high of $145 in July this year.
The precipitous decline has been tied to the broad cooling of demand that has been largely tied to the economic turmoil pummelling the US, Europe and the rich Asian nations.
With troubled companies in these regions cutting jobs by the thousands, shrinking the numbers that can afford to drive, demand for gas has retreated in most of these economies prompting a collapse of the barrel.
But even as the good tidings from the international petroleum market continues to flow ceaselessly, Ugandan motorists, frustratingly, have seen little or no change at the pump, prompting charges that local petroleum dealers could be manipulating and exploiting the market.
In fact most companies including Total, Caltel and Kobil spiked their pump prices last week by more than a hundred shillings even as the barrel was in free fall. Shell currently has the cheapest fuel, with most of its stations selling petrol and diesel at Shs2490 and Shs2350 per litre respectively.
In an interview, Kobil's General Manager, Daniel Segal wasn't exactly elated by the steep drop of the barrel, fretting instead about a couple of other factors he said would not enable them to cut the prices in response to the developments in the international market. "It's true that the barrel has dropped so sharply. That's a fact. But Ugandans must also be aware of many other factors that are influencing the prices they pay at pump," he said.
Foremost among these, he said, were the sharp appreciation of the dollar against the shilling. Local petroleum companies trade in the Shilling but they sell those Shillings to get the dollars that they use to import fuel. In the last two weeks, the dollar has climbed to now Shs1800 from Shs1600. " so you realize we are using more of the shillings earned at the pump to purchase the same amount of dollars and certainly when you have that situation," he said " prices at the pump may not necessarily come down even the barrel had dropped."
The price of transporting fuel from Kenya to Uganda has also leaped, starting 1st October when the Kenyan government banned all 4-axle tankers. Now a single tanker is allowed to carry a maximum of 30,000 litres, from 42,000 litres that they used to carry before the ban. "So the cost unit of hauling a single tanker has climbed and these factors ultimately affect the price at the pump," he said.
Petroleum companies' explanations however do not seem sufficient to show why pump prices have declined marginally (by an average of Shs250) while the barrel has dropped by an entire half of its peak price of $145.
Industry executives have suggested that Ugandans are impatient, wanting a decrease of the pump prices the instant a barrel drops although oil purchased in the Middle East takes nearly a month to arrive into the tanks of cars here in Kampala.
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