Why fuel prices are still high despite global fall

As authorities speak of possible decline in oil prices in the country following a major slump in the world market, chairman of Public Accounts Committee (PAC), Mr Zitto Kabwe, has raised concern that Tanzanians might not feel any tangible impact and will keep digging deeper into their pockets for the key commodity.

However, the Energy and Water Utilities Regulatory Authority (Ewura) says that there was a possibility of oil prices falling starting February, as the cheap oil currently being produced will have entered the Tanzanian market.

Through the bulk procurement system that the country is using, the oil that is presently in the Tanzanian market was procured last October.

 The price of crude oil in the world market has dropped from $110 per barrel in June last year to the current $ 56, the lowest price since 2009.

Ewura, however, cautioned that the price won’t fall by any big margin since the Tanzanian currency continues to weaken against the dollar while the country buys refined oil.

According to Mr Kabwe, the decline in the world market by around 40 per cent hasn’t brought any significance to the Tanzanian consumer.

“There isn’t any relief to the Tanzanian end user…the pump price is still at Sh2,029 for petrol and Sh1,909 for diesel per litre… if it were about crude oil price going up in the world market, the impact would have been very quickly felt here,” quipped Mr Kabwe.

 In early December, the pump price in the country went down by Sh149 for petrol and Sh119 for diesel when compared with November prices.

 Mr Kabwe who is also Kigoma North MP (Chadema) said while it was true that the country was buying refined oil, Tanzanians should have enjoyed lower prices because the major crude oil processors are getting the product at reduced prices.

“The same can also be said about a weaker shilling in the face of the strong US dollar… The shilling has plunged against this major currency by 10 per cent while the reduction of oil price is at a whopping 40 per cent and going by Ewura’s standard methods of calculations, I would expect the price here to fall by between 15 and 25 per cent,” he said. He said it was obvious that relevant authorities, especially Ewura, should tell Tanzanians why the fall of oil prices in the world market isn’t affecting the pump prices in their country.

“People want immediate answers, and if there isn’t such a response, then what they should see now is some tangible reduction in oil prices in their country,” he said.

The matter has also attracted social media debate as tweeps are asking themselves why the changes that they read and watch occurring in the world market are yet to positively affect their country. There are those who suspect that oil dealers have a cartel which is there to protect their interests while Tanzanians’ pockets continue to be drained by old prices.

Meanwhile in the world market, consumers of biggest oil exporters especially in US and Japan are jubilant over the price fall, but conspiracy theories are already flying saying the fall is another consequence of the Syrian civil war.

While the prices have been remarkably going down, rich gulf oil producers such as Saudi Arabia, Qatar and Kuwait convinced Opec to keep pumping at current levels rather than cut back production.

The countries are siding with the US in the war against the Syrian regime, and their wealth and foreign currency deposits will help them navigate the turbulent markets in the immediate future.

On the other side of the coin, there is Iran and Russia which support embattled Syrian President Bashar al-Assad and the two countries need the oil price to be at around $100 per barrel for them to sustain their economies.

“For four years and a half, we had a very decent price. Now the price has declined, but that does not mean that we should really rush and do something. We have to wait and see how the market will settle,” said Opec secretary general Abdullah al-Badri.
Source: The Citizen, reported by Athuman Mtulya from Dar es Salaam, Tanzania
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