12 August 2014

Tanzania: Worries Abound As Petrol Prices Rise

FUEL prices that has a critical input into range of sectors and industries remains to be one of the major factors that drive up the cost of living affecting most Tanzanians whose incomes is full of uncertainty.

The prices for petroleum products have in the last 12 months increased, though at different levels but the incomes of most Tanzanians have either remained the same or dropped.

The monthly indicative prices of petroleum products published by the Energy and Water Utilities Regulatory Authority (EWURA) show that the retail petrol prices for August this year have changed to the highest of 2,266/- per litre in Dar es Salaam Region compared to 2,096 /- in 2013.

Diesel prices increased to 2,106/- in August 2014 compared to 2,037/- in the corresponding period in 2013. Kerosine prices jumped to 2,057/- compared to 1,962/- of August last year.

In Lugufu Uvinza Kigoma Region, petrol prices rose to 2,510/- per litre by August this year compared to 2,339/- in the corresponding period in 2013.

Diesel prices changed to 2,349/- per litre in August compared to 2,280/-in 2013. Kerosine exhibited changes to 2,300/- compared to 2,205/- per litre.

A senior lecturer at the Mzumbe Business School, Dr Honest Ngowi, said though not alarming, the increase of fuel prices has a far reaching impact to low income earners, in particular those whose source of earning is uncertain.

"Given that petrol or diesel is such a critical input into a range of sectors and industries, any increase in fuel prices will have a ripple effect, causing other sectors in turn to hike their prices," he said.

A weaker local currency and swings in international energy prices are among the factors attributed to the increase of both retail and wholesale fuel prices. Also, fuel prices are the second-biggest driver of inflation in Tanzania.

"An increase in fuel prices has both obvious and more subtle impacts on inflation," he said. One type of impact is straightforward - fuel prices, along with lighting have a share of about a tenth in the overall basket of goods used by the government to calculate consumer inflation.

The trucking industry, for instance, when faced with paying more for diesel, will begin to charge higher transport rates from industry to move goods across the country. Industry will in turn attempt to pass on that increase in costs to their customers.

Diesel is used by farmers to run their irrigation pump sets, so any increase in diesel prices results in higher costs for farmers, and over a period of time, higher food prices for consumers.

But again, that's only part of the effect. In most circumstances, oil importation makes use of huge amount of foreign currencies, the situation that affectsThe monthly economic reviews by the Bank of Tanzania (BoT) show that most of the foreign currencies are being spent in oil imports, driven by a surge in volume and prices.

For example, a total of 4,319.93 million US dollars were spent in the year ending May to import petroleum products compared to 3,681.9 million US dollars used in the corresponding period last year.

The cost of running gasoline engines keep on rising, the situation that forces motorists to spend more to keep their vehicles moving.

The indicative prices for the month of August shows that the retail prices of petrol has increased by 39/- per litre equivalent to 1.74 per cent compared to an increment of 17/- or 0.75 per cent of the previous month.

However, motorists with gas oil engines have a reason to smile following a continued easing of prices by 18/- per litre or 0.85 per cent in the month under review compared to 1/- per litre which is equivalent to 0.07 per cent slashed in July.

For kerosine users who in July saw the prices of the commodity registering a slight price hike by 14/- per litre or 0.68 per cent will in August get relief 4/- per litre which is equivalent to 0.18 per cent.

Similarly, the wholesale prices for Diesel and Kerosene have decreased by 18.13/- per litre which is equivalent to 0.90 per cent and 3.74 per litre or 0.19 per cent respectively while for Petrol the wholesale price has increased by 38.69/-, equivalent to 1.82 per cent.

The changes according to EWURA have been caused by changes in prices of petroleum products in the world market and little appreciation of Tanzanian shilling against the United States dollar.

In Dar es Salaam for example, motorists using gasoline will have to pay 2,266/- per litre for the whole month of August, up from 2,227/- paid in July. For gas oil engines, motorists will have to pay a retail price of 2,106/- compared to 2,123/-.

The cost of transport for the people in the remote regions will continue paying heavily for petrol with the retail price at Ruberwa town (Kyerwa district) in Kagera Region rising to 2,503/- in August compared to 2,464/- of the previous month.

The retail price for gas oil eased to 2,343/- from 2,360/-. At Lugufu in Uvinza District, Kigoma Region, the retail prices for petrol has increased to 2,509/- compared to 2,470/- in July while retail diesel prices has eased to 2,349/- from 2,366/- of the previous month.

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