INTERNATIONALLY oil is a commodity whose price gravely impacts every sector of economy that any volatility in its price and supply threatens the economy. Various studies have shown that the poor are the most vulnerable to the effects of rising fuel prices and the current struggle by most Ugandans to
INTERNATIONALLY oil is a commodity whose price gravely impacts every sector of economy that any volatility in its price and supply threatens the economy. Various studies have shown that the poor are the most vulnerable to the effects of rising fuel prices and the current struggle by most Ugandans to live.
Traders have ended up passing high fuel prices onto the poor with no insulation. Higher oil process have increased cost of production and marketing thus increasing the cost of living. Because the poor are the most affected by the high cost of living, governments across globe try as much as possible to ensure stability.
Uganda’s recurring fuel shortage and skyrocketing fuel prices raises questions of whether our Government perceives the impact this volatility has on the poor.
The biggest question is, whether fuel prices are not used as a tool to impoverish people further?
According to the World Bank, four million people slid back into poverty in Philippines in 2006 as a result of higher cost of living from rising oil prices. I do not know how many Ugandans will slide back into poverty as a result of the current exorbitant fuel prices.
Our planners should have learnt from our previous fuel shortages, but that is not the case. On several occasions, the national reserve at Jinja has run out-of fuel, supplies have been manipulated and the fuel supply infrastructure has been vandalised.
The Government seems to be doing little to curb volatilities in fuel supplies and prices and to prevent reoccurrence of the same.
It is time Uganda looked at both short-term and long-term measures of dealing with fuel prices and future energy insecurity.
Uganda could borrow a leaf countries that have learnt to manage fuel shortages. For instance Chile and Indonesia have used price-smoothing, a practice where a country fixes target oil price; and subsidises oil if the international price goes above the target, and imposes taxes if it falls below target.
Uganda could consider increasing her security fuel stocks by building additional strategic reservoirs in Arua, Mbarara, and Masindi to reduce the impact of a temporary shortage or a major price shock.
The Government should use financial instruments to mitigate prices. Such instruments work like car insurance, if the risk occurs, the insured makes claim, but if the risk does not occur, money is lost to the insurer.
There is certainly excitment about oil discovery; even if Uganda commences drilling tomorrow, fuel is a finite good, a long term solution for the country’s energy security lies in exploring alternative fuels, integration of energy efficiency in all programmes, and investing in renewable energy.
Uganda, just like Ghana must set energy efficiency standards for all imported equipments to reduce energy consumption. Uganda invest in refinery to cut added costs in refined products.
The writer is founder - West Nile Rural Development Agency.
https://www.newvision.co.ug/news/1014440/learnt-past-fuel-crises
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