Fuel prices have increased by up to sh200 in the last two weeks as the shilling continues to weaken, besides rising tension ahead of the Kenyan polls due March 4. Petrol prices, which were ranging between sh3,650 and sh3,700 about two weeks ago, are now at between sh3,800 and sh3,850. Diesel has also increased from sh3,450 to sh3,500.
By Tuesday, the shilling was going at 2665/2675 (buying and selling respectively) as compared to the end of last year when it was below sh2,600. Although the shilling started depreciating as early as January, fuel prices noticeably went up about two weeks ago.
Rajni Tailor, the petroleum dealers' association chairperson, said whereas the appreciation of the dollar against the shilling was partly responsible for the rise in pump prices, growing tension ahead of Kenyan elections were mostly to blame.
Not enough fuel in stock:
"The dollar is playing between $50 up and down, but that cannot solely explain the rise in fuel prices by over sh100 per litre. We do not have enough fuel in stock, and unless the Government does something, fuel prices might rise further like it was in the 2007/08 postelection violence period," Tailor warned.
He said a few days to Kenyan elections, many dealers are likely to stop importing fuel through the main route of Mombasa, and this will affect supply because the Government reservoirs are not operational, thereby prompting dealers with fuel to increase prices.
"For almost a week towards and after elections, there will be no movement of trucks because people do not want to risk it." In 2007, many people lost out when their trucks got burnt and merchandise looted. The other alternative is transporting fuel through Tanzania, but it is an expensive route," said Tailor, who also owns Gapco filling station on Jinja road in Kampala.
Daniel Segal, an oil consultant and former managing director at Kobil Uganda, said since the national reservoirs are not operational, the dealers' stocks cannot last beyond a week. "Dealers can stock fuel for a week but if there is little or no supply beyond that period, there will definitely be a shortage."
Segal noted that the Southern route (through Tanzania) would solve the shortage, but it is expensive, and that the sh150 tax waiver that the Government recently said dealers would benefit from was just agreed on in principle but is not operational.
Depreciation of the shilling Segal, however, noted that the dollar rate affects fuel prices instantly compared to any other factor. Shell Uganda chairman Ivan Kyayonka also said the depreciation of the shilling was the biggest reason for rising pump prices. Unlike other dealers, Kyayonka said the tension ahead of Kenyan elections had not yet affected their supplies as their trucks were still bringing in oil products.
"The other issue that is also affecting prices is the rise in the cost of logistics, especially when we use the Dar-es- salaam route." Asked whether Shell had enough stock, Kyayonka said: "Fuel is transient. We bring in stock and it goes. But we are trying to build up our stock."
Fuel prices have been relatively stable ever since they last shot up last October, largely due to the depreciation of the shilling against the dollar. Diesel is the most used oil product in Uganda, with 1,585,000litres consumed per day. The country consumes 940,000 litres of petrol and 170,000 litres of kerosene daily.
However, the commissioner of petroleum supply in the energy ministry, Rev. Frank Tukwasibwe, on Monday assured Ugandans that there is enough fuel stock that can take the country through the period of Kenyan elections.
"We do not envisage a situation of any fuel shortage. Those who have bought and are trying to hoard it may not make much out of it because we have sufficient fuel supply." Although Tukwasibwe said the prices would remain normal, they have already started rising.
Responding to questions on how prepared Uganda was to manage its fuel stock in relation to the coming Kenyan polls, he said while Uganda is optimistic that the situation will remain calm, since the Government was doing everything possible to ensure continued sufficient supply of petroleum products. "Once fully stocked, storage facilities for private companies alone can take us for over 10 days," Tukwasibwe added.
The 10 days are in relation to the holiday that Kenya might have around the polling date. The commissioner said it is critical to ensure that the products keep trickling in and that the Government is in touch with the companies to ensure that their supply is uninterrupted.
The Jinja reservoirs:
Commenting on the ongoing refurbishment of government reservoirs in Jinja, Tukwasibwe said the facility would be ready to receive products by the end of this month. He was, however, quick to state that restocking of the reservoir may not be immediate, considering the challenges involved in the fuel supply chain in the region. Nonetheless, he stressed that with various recautionary measures taken on fuel supply, there should be no cause for alarm.