The average price of gasoline around the world is US$ 1.22per litre.
However, there is a substantial difference in these prices among countries. The differences across countries are due to the various taxes and subsidies for the fuel. That is exactly why East Africa, for the greater part of this year, will pay over 10 per cent more for fuel. Fuel prices are also going up in South Africa, but due to reasons related to instability.
“All countries have access to the same petroleum prices of international markets but then decide to impose different taxes. As a result, the retail price of fuel is different,” explains globalpetrolprices.com, a platform that reviews global fuel price trends.
As of July 1, the price for petroleum products in Tanzania increased drastically owing to amendments outlined in the country’s new Finance Act as passed by parliament. A huge chunk of the money paid at the pump, i.e. the fuel price pump, goes to the government in taxes. In fact, the government takes anything between 30 and 40 per cent in form of taxes, levies and regulatory fees.
Nonetheless, Tanzania’s Energy and Water Utilities Regulatory Authority (Ewura) still attributed the price hike to global trends, in part admitting to the tax effect and in part deflecting it to global trends.
“Apart from changes in Fuel Levy and Petroleum Fee, changes in local prices are also due to changes in the world oil market prices and BPS premiums,” Ewura statedin a recent publication.
However, with the new prices, be it for whatever reason, fuel prices in Tanzania have more than doubled (58 per cent) over the last year alone.
By comparison, in the port city of Dar es Salaam where motorists are enjoying the lowest fuel prices in the country, car users are currently paying US$ 1.04 litre of petrol, up from US$ 0.66 in June last year.
The price increases are notably higher than the increased cap earlier proposed by Ewura which was US$ 0.043 with the agency blaming the increase on higher global prices. Either way, Tanzanians have to now dig deeper to fill up their tanks.
Worse, still, for the common man, it can be expected that the cost of public transport, the most used mode of transportation, will go up. As the price of fuel increases, bus owners are expected to compensate for the increase through an equal if the not higher adjustment of bus fares.
Generally speaking, the increased tax prices for fuel have increased the cost of living. Tanzanians now have to spend more in their day to day lives unless the price of other daily needs goes down.
Higher Prices in Kenya and Uganda
The situation is no better across the border in Kenya; it is worse, and it has been for a while. Back in March, Kenyans were driving across the border to refill in Tanzania where prices were lower.
Interestingly, even with the increased taxes and eventual increase in prices at the pump, the price of fuel in Tanzania remains lower than that of the rest of East Africa and in particular Kenya and Uganda.
Notwithstanding, in almost all cases, the price is lower in the port of entry of the fuel and so, in Tanzania, prices are lower in Dar es Salaam than in the capital Dodoma, which is in the central part of the country. Similarly, prices are lower in Kenya’s port city of Mombasa than in Nairobi’s inland capital.
However, Tanzania may have lower prices in East Africa but it is not the case across Sub-Saharan Africa let alone the continent. For instance, as Kenyan motorists are crossing into North-Eastern Tanzania for lower prices, that is the same case for Tanzania’s in the lower Southern areas.
World Fuel Prices Increasing
As of June this year, oil prices increased again owing to increased global demand. Why is there such a sustained increase in demand for oil? Fuel Prices in USA are a key indicator of how the global market will react.
Usually we would look at what the suppliers are doing, the Organization of the Petroleum Exporting Countries (OPEC) whether they are withholding supply or not. But since supply has remained fairly consistent, the fluctuation of prices is solely from the demand side.
Oil is used in a multitude of ways in our lives, from making plastics to asphalt to fuel. As such, changes in oil prices can significantly affect the global economy. So even the ongoing increase in demand is monitored closely to determine cause and effect, and here are the purported reasons.
The International Energy Agency (IEA) forecast back in June that global oil demand was to increase 6 per cent this year and associated the increased demand to the ongoing Covid-19 pandemic. Nations and businesses are stocking up on oil, unsure of what the future holds. It can then be explained that the increase in global demand for oil is based on investor speculation of uncertainties in the future due to the pandemic.
“Vaccination campaigns in Europe and North America, which represent 40 per cent of global oil demand, have supported growth,” reports the IEA.
In fact, the IEA predicts that oil prices will go down to pre-pandemic levels by the end of 2022 as the pandemic hopefully fades away.
For June, oil demand was forecast to rise by 2.5 million barrels per day (bpd) month-on-month, making it one of the largest monthly gains recorded in the past year according to IEA.
The increase is also occurring “…in transport fuels, such as gasoline and jet fuel in India, the US and other large oil consumers,” the agency said.
Demand is likely to grow by a further 1 million bpd month-on-month in August, as the Northern Hemisphere summer holiday season supports increased travel and as such we can only expect higher prices at the pump until the pandemic goes away. But for now, with the expected increased drive for vaccination, the prices will keep heading north.