Among these include; Shell, Total, Luqman, Rubis, Hass, Stabex, Kobil, Petro City, City Oil etc. They largely set their prices based on cartel arrangements and the ECOWAS community. In 2016, a litre of petrol averaged at Shs 3,258. However today, it has sky-rocketed to a tune of Shs 5,800 per litre of petrol in Kampala, Shs 10,000 in Hoima while in Kalangala petrol goes between Shs 6000 and Shs 8,000 per litre according to Hon. Robert Migadde.

Several fuel stations have run out of petrol and their price tags have been seen indicated with only ‘0000’ indicating there is no fuel in stock. It is on record that when fuel prices increase, they don’t get back to the original price but rather keep hiking which retards economic progress and eventually worsens the cost of doing business among Ugandans. 

According to the minister of Energy and Mineral Development, Ruth Nankabirwa, the rising fuel prices are caused by hoarding petroleum products by some oil dealers to create artificial scarcity to sell at exorbitant prices. Some fuel shortages in some parts of the country are due to the interruption of the supply chain at Malaba and Busia borders where transit drivers were allegedly protesting COVID-19 tests.

The minister also added that the shortage is attributed to the full reopening of the economy which has created more demand for fuel products. This is a little illogical!!

A combination of factors might have led to this rapid increase in fuel prices in Uganda. Some economic and financial analysts argue that it is the effect of COVID-19 that hit the global economy, changes in foreign exchange rates, the new tax regimes in the East African community among others.

In 2021, economies picked up and pump prices in Uganda rose sharply from Shs 3,700 to Shs 4,150 per litre of petrol mainly on Shell and Total petrol stations. Though high, these prices have been stable until the current nightmare. New tax measures also saw a Shs 100 increase in the excise duty per litre. However, this did not take immediate effect on the prices, at least in the first two months of the financial year.

The permanent secretary to the ministry of Finance, Ramathan Ggoobi contended that the current spike in fuel prices has nothing to do with economics. He argued that it was caused by a temporary exogenous shock caused by administrative decisions to control the spread of COVID-19.

In East Africa, Kenya charges an average price of Shs 4,435 per litre of petrol, Burundi at Shs 4,339 while Tanzania and Rwanda at Shs 3,781 and Shs 3,845 respectively. This implies that Uganda’s fuel prices are the highest in the region.

The rising fuel prices have worsened the cost of doing business as well as citizens’ wellbeing. Fuel prices have sky-rocked in a period when schools and other sectors have reopened after a recess of approximately 2 years.

The reopening of all sectors implies public movements in large numbers whose cost especially for public transport, is unfriendly. The situation is worse for entrepreneurs and workers who travel quite long distances to city centres for work.  

Some private vehicle owners have abandoned them and resorted to public means to reduce transport costs.  We shall not mention the dramatic incidents where some members of parliament were seen riding bicycles to go for parliamentary sessions. Of course, this wouldn’t be news, but in the Ugandan setting and mindset, it is!

To businesspeople, the increase in fuel prices has worsened the cost of business operations. The burden falls on the final consumers, reduces the market share and ultimately leads to losses, with some business owners showing signs of a desire for temporary closure.

Way forward

• Revising taxes charged on fuel. Fuel being a necessity, it would ideally be charged with a citizen-friendly tax to increase access to fuel. This is because fuel prices affect almost all sectors of the economy hence a reduction in taxes charged on fuel will certainly increase the volume and value of trade and ultimately promote economic growth and development. There is a need to subsidize fuel prices to reduce the exorbitant fuel prices.

• Expedite the exploitation and production of oil in Hoima. This can provide relief in periods of the fuel crisis. Ugandans are eager to start using their oil and it is anticipated that it will be at a low cost compared to imported oil.

• Revive Uganda’s oil reserves. It has been noted that Uganda’s oil reserves are empty rendering them invisible especially during this fuel crisis. This needs urgent attention.

• Uganda needs to restrengthen its relationship within the East African trade to ease free movement across border points. Barriers instituted should be removed such that petroleum trucks can move freely and reduce fuel shortages in individual countries.

Conclusively, fuel is not a luxury but rather a necessity. Government should lay strategies and develop citizen-friendly commercial policies to reduce the cost of doing business in Uganda.

Article authored by Kiberu Jonah, Vicent Kibira, Joseph Kayemba and Nannozi Susanie Ggoobi, directors and Staff at Gateway Research Centre, Uganda 

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