Fuel prices: Why Tanzanians must brace for tougher times

Dar es Salaam. Tanzanians must be bracing for more pains as several factors point to further increases in prices of petrol and diesel and that yesterday’s rise could be just the beginning of even tougher times ahead.

The Energy and Water Utilities Regulatory Authority (Ewura) yesterday announced an increase of Sh463 and Sh Sh391 for a litre of petrol and diesel respectively, in Dar es Salaam.

Ewura attributed the rise to challenges in the availability of US Dollars and changes in fuel levy, prices of petroleum products in the world market and premiums in importation of petroleum products.

With effects from yesterday, a litre of petrol and diesel is sold at Sh3,199 and Sh2, 935, in that order, according to a statement signed by the Ewura director general, Dr James Andilile.
Going by the current global trend, at the start of this year, petrol was trading at less than $2.50 per gallon.

Last week, its price topped $2.90 per gallon and may yet reach $3.
Brent crude, meanwhile, started the year at around $78 per barrel.
Last week, the international benchmark, crude grade, reached $83 per barrel.

And, in what signals that the high prices could be there for a long time time, last week, the US Federal Reserve raised its benchmark lending rate by 0.25 percentage points to the highest level since 2001 to tackle above-target inflation.

It, however, signalled it could hike again later this year amid improving economic prospects, with economic experts expressing worries, saying the move will accelerate gains that the dollar has been making against the Tanzanian shilling.

The Tanzanian shilling, which was trading at around Sh2,300 to a greenback in June last year is now fetching between Sh2,505 and Sh2,610 depending on whether one was buying or selling.

This means that by just the change in the value of the local currency against the greenback, local consumers of petroleum products will be paying more irrespective of whether or not there is a change in global prices of the products.

Tanzania Truck Owners Association (Tatoa) chairperson Elias Lukumay said the hike in fuel prices is a cause for worry for governments around the world because petrol, along with diesel, plays a lead role when it comes to inflation.

“When the price of fuels rises, our operational costs will rise and so will the prices of everything else,” cautioned Mr Lukumay.
This, he added, is because everything else is being moved from one place to another—from producer to consumer—on vehicles using either diesel or gasoline.

Yet, while diesel is a lot more common for goods transportation, petrol is a lot more popular among regular drivers.

Institute of Management and Entrepreneurship Development Chief Executive Officer Donath Olomi said the increase in fuel prices was fuelling concern about more inflation.

“This (Sh463 for a litre of petrol and Sh391 for diesel) is a significant increase at ago,” warned Dr Olomi, who doubles as an economist and trade expert.

He went on to add: “The costs of living will be high as the skyrocketing of fuel prices have an impact on transport and transportation that tends to drive the costs of other products.”
To lessen the pinch, Dr Olomi was of the view that the government should step in and provide subsidies to reduce fuel prices.
If the government does so, it will not be the first time for it to do so.

In May, the minister for Energy, Mr January Makamba, said by the time, the government provided a subsidy of Sh100 billion to reduce fuel prices in the country.

In the long-term, Dr Olomi suggested Tanzania to shift its focus to natural gas to reduce its reliance on imported petrol and diesel. “We need massive investment on gas which is cheaper than petrol and diesel,” said Dr Olomi.

Dar es Salaam residents currently need around Sh17,000 to refill an 11-kilo cylinder of compressed natural gas (CNG).

With a kilo of CNG having an energy equivalent of 1.39 litres, the prices suggest that a similar cylinder would be filled with 15.29 litres of petrol, costing a staggering Sh 48,912.71.

In simpler perspectives, petrol is currently 65.24 percent more costly than CNG.

Tanzania Drivers Workers Union chairman Schubert Mbakizao said the increase in fuel prices was a huge blow to drivers whose living standard depends quite a lot on affordable fuels.
He cautioned that if fares do not increase, some of their bosses could probably pack their vehicles and hence make drivers, especially those with no contracts, lose their jobs.

Tanzania Bus Owners Association (Taboa) secretary general Priscus Joseph said the hikes in prices will adversely affect them.
He said for buses going upcountry, the jump in price will increase operational costs by between Sh100, 000 and Sh250, 000.

As it is, he called for respective authorities to revise bus fares, to cushion them from that huge blow.
Land Transport Regulatory Authority (Latra) acting head of Public Relations and Communication Salum Pazzy said if stakeholders wanted new fares, they should follow the due procedures.

“They need to file an application to us,” he underscored.
However, he said, there were several factors to be considered before changing fares of public transport.
The factors include prices of vehicles and spare parts, as well as the business trend.

Efforts to get fresh comments from The Tanzania Association of Oil Marketing Companies (Taomac) proved futile.
But in the recent past, its executive director, Mr Raphael Mgaya, was quoted by The Citizen as suggesting for the government to set a stage for Oil Marketing Companies (OMCs) to import fuels using the country’s currency.

Further, Taomac proposed a government to government arrangement that will pave a way for OMCs to make payments in instalments amid the dollar shortage crisis.