Uganda has encountered a setback in its efforts to reduce petrol and diesel prices in Kampala through a direct fuel purchase deal with Vitol Bahrain. Instead of lowering costs, the prices of diesel and petrol in Kampala have risen, making it the city with the most expensive fuel in East Africa.
Current Fuel Prices
This week, the price of diesel in Kampala increased to $1.38 per litre from $1.37, while the price of petrol rose to $1.47 from $1.46. In comparison, Nairobi’s fuel prices are slightly lower, with diesel at $1.32 per litre and petrol at $1.45 per litre.
Background and Government Promises
Last year, President Yoweri Museveni announced that the direct import deal with Vitol Bahrain would help reduce pump prices in Kampala by eliminating the “middlemen in Kenya.” He attributed the higher fuel prices in Uganda to these intermediaries involved in Kenya’s government-to-government agreements with three Gulf oil majors.
Implementation of the Import Deal
The Uganda National Oil Company (Unoc) signed a five-year import agreement with Vitol Bahrain. The first shipments of petrol and diesel arrived earlier this month and are currently being sold in Uganda. Despite these direct imports, the anticipated price reductions have not materialized.
Economic Implications
The increase in fuel prices is a significant concern for Uganda, as it impacts transportation costs, goods and services prices, and the overall cost of living. The failure to lower fuel prices as expected has raised questions about the effectiveness of the direct import strategy and its ability to deliver economic relief to consumers.
Conclusion
Uganda’s direct import deal with Vitol Bahrain has not succeeded in lowering fuel prices in Kampala. Instead, fuel costs have risen, making Kampala the city with the highest fuel prices in East Africa. The government’s strategy to bypass intermediaries has not provided the anticipated economic benefits, prompting further scrutiny and potential reevaluation of fuel import policies.
