Tanzania moves to reduce fuel prices as Kenyans stare at new cost surge

Tanzania attributes lower cost to falling global oil prices by an average of 5.68% and a reduction in importation premiums

Tanzania’s Ministry of Energy is effecting a significant reduction in fuel prices, effective from November 1, 2023. This move comes at a time when Kenya is grappling with a surge in fuel costs driven by increased taxes and global market dynamics.

The Energy and Water Utilities Regulatory Authority (EWURA) in Tanzania has initiated price caps for petroleum products in various regions, including Dar-es-Salaam, Tanga, and Mtwara. Commencing November 1, 2023, Tanzanians will experience a noteworthy drop in fuel prices.

The revised prices range from Tsh 3,274 (Sh 198.42) to Tsh 3,347 (Sh 202.84) per liter of petrol. Diesel prices now fall within the range of Tsh 3,374 (Sh 204.48) to Tsh 3,546 (Sh 214.90), while kerosene will be available at prices spanning from Tsh 3,423 (Sh 207.45) to Tsh 3,495 (Sh 211.81).

EWURA has attributed these price adjustments to several key factors. The decrease in global oil prices by an average of 5.68% and a reduction in importation premiums, averaging 13% for petrol (PMS) and 25% for diesel (AGO), have played a pivotal role.

Additionally, the decrease in petroleum production by OPEC+ nations, along with the economic sanctions imposed on Russia, have collectively contributed to this positive outcome.

Tax increments

Furthermore, EWURA has issued a stern warning to fuel retailers in the country who attempt to sell petroleum products above the regulated price caps. These retailers have been instructed to provide electronic fiscal pump printers (receipts) for all transactions to ensure transparency and adherence to the stipulated pricing.

Conversely, residents of border towns in Kenya, such as Namanga, have increasingly chosen to cross the border into Tanzanian towns to purchase fuel. The rise in fuel prices in Kenya, attributed to recent tax increments, has driven consumers to seek cost-effective alternatives across the border.

However, the Cabinet Secretary for Energy and Petroleum, Davis Chirchir, has raised concerns about the future fuel prices in Kenya. He anticipates yet another surge in fuel costs, which could potentially exceed Sh300 per liter. Chirchir has cited global petroleum pricing and the Israel-Hamas conflict as primary reasons for this impending hike.

Conversely, the Central Bank of Kenya holds a different perspective. The institution’s insights on fuel prices and global inflation contradict CS Chirchir’s warnings. According to the Central Bank, international oil prices have been on the decline due to the waning impact of the Israel-Palestine conflict. This situation challenges the predictions of elevated global petroleum prices and their effects.

Losing Uganda

Kenya’s recent tax policies and the government-to-government fuel importation agreement have caused the nation to forfeit its position as a major petroleum import partner for Uganda.

This shift was triggered by the revelation that Kenyan intermediaries were inflating landing costs and selling petroleum products to Uganda at excessive prices. In response, Uganda has established a direct import deal with a Bahrain-based company, with transportation routed through Tanzania. This arrangement is set to considerably lower fuel costs in Uganda.

In addition to changing the landscape of petroleum trading, Kenya’s role as a primary transit route for Ugandan goods has been transferred to Tanzania, reshaping regional dynamics within East Africa.

The reduction in fuel prices in Tanzania offers a respite to consumers in the country, while Kenya continues to navigate the challenging terrain of rising fuel costs driven by a combination of domestic tax policies and global factors. The economic implications of these changes are set to reverberate across East Africa’s fuel market.