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Fuel prices to stay high – Migereko

By Patrick Kagenda

For about a year, Ugandans have endured high fuel prices. Patrick Kagenda interviewed Minister Daudi Migereko about the soaring fuel prices.

Uganda has been experiencing a fuel crisis since Nov 2007 and its now one year whats the cause of this crisis?

The refinery in Mombasa is still undergoing rehabilitation and refurbishment and the pipeline which is supposed to deliver petroleum products from Mombasa to Eldoret from where we pick petroleum products has been having a problem of limited capacity in terms of the amount of fuel it can deliver at any one time. A new pipeline and new pumping systems are being worked on.

But also many activities have come up in the region over time; there are mining activities in Tanzania, the dam construction at Bujagali, mini hydros; all theses activities require a lot of fuel, over and above what we have traditionally been utilising. In terms of delivery, may be we would mitigate these by picking the products from Mombasa using the railway system, the road network and so on. Unfortunately RVR which is managing the Kenya –Uganda railway concession has not been performing to the anticipated levels. They need an infusion of capital; they need to procure new locomotives, tankers and wagons.  When it comes to delivery by road network, there is the requirement on transporters to transform their trucks from four axles to three axles and many transporters were not ready but the governments have insisted particularly the government of Kenya. But even for the fleet that is available, one tanker which used to deliver 30,000 litres because of this new axle requirement delivers reduced volumes of petroleum products because the capacity has to go down in light of the fact that the number of wheels has been reduced. We also had a problem of the strike at the border where transport companies were complaining about the conditions of the customs yard at Malaba and Busia.

Why should the country chock at every minor glitch, is it a result of poor planning in your ministry?

No it is not poor planning. In as long as we are depending on imported products we need to make sure that there is steady replenishment of stock. If there is no steady replenishment of stock we run into problems. But we are also going to solve that problem, we are currently working on expanding storage facilities in Jinja, we are working on putting up new storage facilities in Kampala, once these are completed then we should be in a much better arrangement.

In 2002, your ministry signed a contract to have a fuel depot built 6 miles from Natete on the Kampala- Mityana high way. Up to now what has been done?

No, we never signed that contract. We are working on arrangements for starting construction of the oil storage facility in that area. We have been going through the process of land acquisition.

Why are we seeing big companies like Shell and TOTAL having their prices high yet small petrol stations in this country are charging less?

The prices of Shell have relatively been low compared to many other companies. The prices of TOTAL have also been relatively low compared to a number of other companies, but it is also true that depending on how and when products had been sourced that will determine the price at which that particular product will be sold for at the market.

Currently the international fuel price is below $ 56 a barrel. Why are Ugandan fuel pump prices still so high?

It is true international prices are coming down and we should be able to see these prices come down here in Uganda. But it is also true that some of the companies are still selling stock which they bought around July- August when fuel prices were at their highest at $140 a barrel. Until this stock is sold out only then shall we be in a position to fully enjoy the low prices that are currently pertaining on the world market. But mark you there are also other developments that have come up, for instance, the piracy on the high seas on the Indian Ocean. The Somali pirates have been hijacking ships and demanding ransom. This has required shipping liners to engage armed escort on sea to ensure that they have got air cover but also they are paying heavy premium, when you total up all this it leads to an increase in prices. There is also the factor of foreign exchange; the Uganda shilling has fallen against the dollar and this depreciation means that, for every dollar import of petroleum product, where you would have been able to see a fall in prices you see an increase in prices.

Does this imply that the global financial crisis has eventually caught up with the Ugandan economy?

The fundamentals of our economy are still strong but it is a fact that we are part of the world economic system. In as long as we are part of the world economic system, if there are developments anywhere in the global economy these are bound to have ramifications on whatever we are doing here.

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