At the start of the year 2022, we started to notice that the fuel prices in the country were at an all-time high. It was easy to blame the spike in the prices on the truck pile-up at the border. However, now that the pile-up is cleared, the prices are still high as fuel stations are still selling fuel at about UGX 5000 to a point where a car owner can fill their car with about UGX 70,000 in fuel and still possess an almost empty tank.
The rise in fuel prices is a common phenomenon across the globe, however, if we are to compare Uganda’s spike to most countries, our nation has a relatively higher risk compared to our neighbouring countries.
Uganda’s economy is governed by forces of demand and supply, meaning there is room for a business entity with a commanding market share to set higher prices for commodities as demand increases. Of course with this being the case, smaller companies are forced to follow suit. It can be argued that though other factors are in play, the rise in fuel prices is major because the big players within the fuel retail business want it that way. It is safe to say that the rise in fuel prices is like a whole other pandemic together. I must admit that it would be unfair to blame our country without giving it the benefit of doubt. Question is, how can our government help regulate and control this dire situation?
A plan to subsidise fuel prices could help the situation. While fuel prices are on the rise everywhere, we can not completely say that our hands are tied. On Wednesday, April 13, 2022, our neighbour Kenya agreed to compensate oil marketers for selling imported fuel at rates that were higher than what was reflected in the retail cap. This is an attempt for the government to end the supply shortage in the country. The cabinet resolved to continue paying any fuel subsidies to support the consumers. The Kenyan government has been able to do this by tapping into a stabilisation fund that is capitalised through a levy of 5.40 shillings per litre of gasoline and diesel.
f the tax levy on fuel is a good step in the right direction. It is safe to say that one of the major causes of a price rise with any commodity is the heavy tax levied on it. As of 2021, the fuel tax rose to a solid Ugx 1,450 per litre on petrol and 1,130 per litre on diesel. Obviously, with this rise, the burden falls on the consumer to cover the cost. If there is a scrap in the tax levy on fuel, this could help mitigate the problem we are currently facing.
It is quite evident that the government should intervene in price negotiation with all key players in the fuel business. A regulated price for fuel would be a first step and legislation that prohibits fuel to be sold above the government regulated price, especially during times like we are in today. Of course, this situation is not a permanent one, because prices keep fluctuating every day today. Despite this fact, it is clear that we need to plan better for the future of our nation.
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