February 18, 2014

Mombasa Pipeline, Single Customs Territory Blamed For Fuel Shortage

FuelUganda has been experiencing fuel shortage for the last few days, with upcountry towns like Gulu experiencing a rise in prices of more than 50percent.

The shortage in Kampala and most towns has seen the price of a litre of petrol increase from 3600 to 3800 shillings. The fuel companies blame this on a pipeline shutdown in Mombasa, which has slowed deliveries.

Hans Paulsen, the Managing Director Vivo Energy, which markets and distributes Shell products, told URN in an email that the pipeline that is used to transport Ugandan bound fuel from Mombasa to Eldoret, where it is picked up by fuel companies, was facing “logistical constraints.” From Eldoret, the fuel is transported by road to Kampala.

This has slowed deliveries into the country, causing shortages for fuel distributors. With the demand, fuel companies have increased prices. According to Paulsen, local fuel prices can be determined by forces of demand and supply. If the demand is greater than the supply, like it is now, this pushes up prices.

Additionally, Paulsen said the new Single Customs Territory (SCT) introduced by the East African Community (EAC) has also hampered delivery of petroleum products in the country. Introduced by the EAC, the SCT allows goods to be cleared and assessed at the point of entry – in this case Mombasa. This, according to URA allows for swift movement of goods into the country. Fuel importers have been the first on the list of companies to use the system. Paulsen says there are “teething problems at the initial stages” of the implementation of the system.

At the moment, the SCT benefits are yet to be seen as the new system is still complex to use.

He was however quick to point out that the fuel shortage is likely to normalize soon due to “increased inflow of the product” in the next few days. Fuel normally plays a role in the transport prices. In Gulu, transport fares had more than doubled by Monday morning.

Uganda imported petroleum products worth 1.01 billion US Dollars in 2013, as global prices remained stable. Other determinants of fuel prices are the cost of importing and distributing the petroleum reserves.

For most of 2013, fuel prices were stable due to constant supply. However in the last one week, the prices have gone up for the first time in more than six months.

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