Why TAnzania oil consumers won’t gain much

Energy and Water Utilities Regulatory Authority (Ewura) yesterday told a parliamentary committee that since 40 per cent of the pump charges in Tanzania comprises taxes, the unprecedented price fall of crude oil at the world market will be of minimal relief to consumers in the country.

Ewura petroleum principal commercial officer Lorivii Long’idu told the committee that regardless of the prices calculated from the world market, a litre of petrol in Tanzania has an additional cost of Sh878, diesel Sh754 and Sh701 for kerosene.

In this country, it appears like taxes and levies on fuel (petrol, kerosene and diesel) are fixed and don’t necessarily depend on the market price paid by importers.

“For petroleum, further breakdown goes thus: fuel levy is Sh263, excise duty (Sh339), Rural Energy Authority (Sh50) and the remaining Sh226 is shared between the wholesale and retail oil traders as profit,” he said.

The Citizen couldn’t independently verify whether taxes on oil were fixed and do not necessarily reflect the importer’s buying price at the global market. It is understood that other levies like REA and Tanzania Bureau of Standards (TBS) were at fixed rates.

According to Mr Long’idu, 60 per cent was the total cost (buying price, freight and insurance) incurred by the importers.

But the Ewura acting managing director, Mr Mutakulwa Mteyeki, said the oil price in the local market has been gradually going down and the trend will continue.

“The stock that we are currently using was procured in November, for February the oil was procured in December… the price has been going down during all these months and currently a barrel of crude oil sells for $44, so we expect by March the price will be lower given the current trend,” he said.

The acting boss further told the parliamentarians that it is not true that once the price jumps in the world market the next day it is reflected in the local prices.

“It is unfortunate that some of you also mention this, but prices in the country are adjusted at every first Wednesday of every month, and it has been so since Ewura started regulating the sector,” he said.

The price of refined petrol went down by 20 per cent in the world market between July and November last year and locally it went down by 16 per cent, and at the same time the price of diesel went down by 28 per cent in the world market and 13 per cent locally.

According to Ewura statistics, the pump price for petroleum went down from Sh2,267 in September to Sh1,957 in January. Diesel went down from Sh2,091 in September to Sh1,847, at the same time kerosene went down from Sh2,040 to Sh1,834.

But Mr Long’idu cautioned that the decline in coming months will depend on how the shilling stands against the dollar.

“The shilling has been falling by four per cent during the same time, one dollar was Sh1,668 in September and now it stands at Sh1,729… we are buying oil in dollars and sell it in shillings, so the price will definitely go up if the shilling will continue to weaken.”

But, what no one wants to accept is the fact that, for instance, at the price of $100 a barrel recorded in the beginning of last year, it was costing importers Sh165,000 at the exchange rate of Sh1,650 against the dollar.

This cost doesn’t include freight and insurance.

However, today, at the price of $50 a barrel, which translates into Sh87,000 at the current exchange rate of Sh1,740 against the dollar—meaning that even with the weak local currency against a major foreign currency, mainly the dollar, the impact of exchange rate in fuel price was almost zero.
Source: The Citizen, reported by Athuman Mtulya,from Dar es Salaam, Tanzania
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