Relief as fuel prices are slashed further

Dar es Salaam. Local consumers will pay Sh187 less on every litre of petrol they purchase as the regulator cuts the charges in response to declining global prices. In a move that should trigger a drop in prices--or at least demand for cuts in charges for products and services linked with petroleum as fuel--the Energy and Water Regulatory Authority (Ewura) capped the price for petrol at Sh1,768 per litre in Dar es Salaam.

The price of a litre of diesel is down by Sh139 and now stands at Sh1,708 while that of kerosene is down by Sh177 to sell at a cap price of Sh1,657 in Dar es Salaam.

Residents of Uvinza in Kigoma will pay Sh2,011 for a litre of petrol. Part of the money covers local transport costs from Dar to the district located near the border with Burundi and the Democratic Republic of Congo. The main reason for this drop in local prices is the dip in the cost of oil on the global market--and this time it reflects the global prices of December, said Ewura Director-General Felix Ngamlagosi. Ewura publishes fuel cap prices in Tanzania Mainland on a monthly basis.

Tanzania imports refined petroleum products under the Bulk Procurement System through the port of Dar es Salaam. The port also clears transit fuel to landlocked countries including Zambia, the Democratic Republic of Congo, Burundi and Rwanda.

When oil prices fall in the world market, it takes up to two months for the impact to be felt locally due to the procurement process, Mr Ngamlagosi said.

Crude oil fell in the world market from $100 per barrel in July 2014 to below $50 in January but it has shown signs of picking up again in the past two days. Crude oil prices rose for a second day yesterday in the world market. The US benchmark--West Texas Intermediate--for March delivery rose 60 cents to $50.17 while Brent crude for March rose 76 cents to $55.51, according to AFP reports.

Locally, the cost of a litre of petrol dropped from Sh2,267 in September--the highest cost in 2014--to Sh1,768 in February, reflecting a drop of Sh499.

There have been public concerns that local prices are not falling at the same rate as that in the world market. But Mr Ngamlagosi emphasised that the rate of the fall of the local fuel price could not be the same as the speed recorded with crude oil as the country imports refined products while the local currency also remains weak against the US dollar.

The local currency has dropped unabatedly against the greenback in the past few months. Until yesterday, the vehicle currency was trading at an average of Sh1,815 from as low as Sh1,650 at the same time last year. These losses are also eating into the benefits local consumers would enjoy due to declining global prices of petroleum products.

And then there are also taxes, fees and other regulatory charges that account for close to 40 per cent of pump prices. 

Impact spread

The public has been expecting relief in the cost of goods and services associated with oil including transportation cost and the electricity charges. But Ewura has not gone into the possibility of transport costs coming down to reflect some relief in fuel prices, saying instead that the matter belongs in the docket of the Surface and Marine Transport Regulatory Authority.