TUESDAY, JANUARY 13, 2015
How local
traders fix oil
prices in Dar
A filling station attendant refuels a
motorist’s vehicle at a Dar es Salaam
outlet. Tanzanian consumers wonder why
they are experiencing no relief in buying
a product whose price in the world
market has fallen by 40 per cent. Ewura
says prices might go down effective
February.
In Summary
For consumers in Dar es Salaam,
where transport to selling points
costs less than elsewhere, a litre of
fuel should be sold at roughly
Sh1,200 according to analysis
conducted by The Citizen.
By The Citizen Reporter
Dar es Salaam. When Tanzanians
welcomed the New Year in 2014, a barrel
of oil was trading at $100, which was
equivalent to Sh165,000, according to the
then prevailing exchange rate, or
Sh174,000 at the current dollar rate.
Fast forward to 2015 and oil prices have
fallen by 52 per cent, reaching a five-year
low of $50 (Sh87,000) a barrel.
A barrel is a unit of volume for crude oil
and petroleum products whereby one
barrel equals 42 US gallons or 35 UK
(imperial) gallons, or approximately 159
litres or 9,702 cubic inches (5.6 cubic
feet).
Yesterday, Goldman Sachs, a global
investment bank, predicted that by June,
this year, a barrel of oil would have
tumbled further to a record low of $45,
which is equivalent to Sh78,300,
according to the current exchange rate of
Sh1,740 to the dollar.
According to a report by the respected
newswire service Bloomberg, Goldman
Sachs said US oil prices would fall to
around $40 a barrel in the first half of
this year, enough to curb shale
investments as it gave up on Organization
of the Petroleum Exporting Countries
(Opec) cutting output to balance the
market.
Earlier, there was push to force Opec to
reduce the supply of oil in order to
prevent a further freefall of prices, but
the producers, especially from Arab
countries, have declined to cut their
daily output.
Global oil prices have fallen by more than
a half during the past twelve months.
With the latest forecast by Goldman
Sachs, in June, this year, oil prices would
have fallen by between 55 and 60 per cent
—the lowest during the past decade.
Goldman reduced its six and 12-month
West Texas Intermediate (WTI)
predictions to $39 a barrel and $65, from
$75 and $80, respectively, while its
estimate for Brent for the period were cut
to $43 and $70, from $85 and $90,
according to the report.
Tanzania situation
Despite the record fall in global oil prices,
Tanzanians consumers don’t have much
to cheer because the tumbling prices are
not reflected proportionately at the
country’s fuel station.
Although the Energy and Water Utilities
Regulatory Authority (Ewura) last week
announced a reduction in fuel of roughly
Sh80 per litre, the adjustments are
nothing compared to what is happening in
the global market.
According to data obtained by The
Citizen , when oil was trading at $100
(Sh165,000) a barrel in January, last year,
it cost importers Sh1,022.40 to import a
litre of petrol. This price includes buying
cost, insurance and freight charges. (Read
The Business Week of Thursday, this
week, to understand where your money
goes in oil sector.)
Mathematically, if at the price of
$100(Sh165,000) a barrel, it cost local oil
importers Sh1,022.40 per litre in January
last year, at the current price of
$50(87,000), the same should cost
Sh587.90—almost down by 50 per cent.
But with Ewura falling into the trap of the
carefully planned tale of importers, local
motorists are told the weak shilling
against the dollar and heavy taxes on oil
prevent them from enjoying the global oil
bonanza.
The taxes and other levies consume about
40 per cent of the pump price in
Tanzania, according to details seen by The
Citizen .
If you take the current importation price
of a litre of petrol, which is Sh578.90
(after the fall of price at the global market
to $50 barrel by yesterday), it means the
total cost before importers add their profit
margin would be Sh815 per barrel.
For the consumers in Dar, where
transport of oil to the selling point costs
less compared to up country, a litre of fuel
should be sold at roughly Sh1,200,
according to analysis conducted by The
Citizen .
But still, in Dar, the situation is more
complicated, because even the formula
used to arrive at the indicative prices by
the regulator calls for more explanation or
even a quick look.
Although there are more taxes and levies
on oil, the consumer won’t understand
that all these are pegged on the market
price, meaning when price goes up, the
taxman also earns more. This being the
case, when prices falls in the global
market, the taxes go down, and it should
mean a relief to local consumers but
apparently, not in Tanzania
