Fuel Price Rollercoaster: Tanzania Grapples with Dollar Shortage During Oil Price Drop

By Adonis Byemelwa

Global oil prices showing signs of continued decline, the Tanzania Oil Merchants Association (Taomac) foresees another drop in the upcoming month. However, amidst these expectations of relief at the pump, importers face a persistent challenge: a shortage of US dollars. This scarcity compels them to seek alternatives, leading to a shift towards Euro transactions.

The volatility in fuel prices underscores the precarious nature of the energy market, where geopolitical tensions, economic fluctuations, and supply chain disruptions can swiftly impact prices, affecting consumers and businesses alike.

 Despite the hopes for a reprieve in fuel costs, the underlying challenges persist, highlighting the need for resilience and adaptability in navigating the volatile energy landscape.

Speaking to reporters Taomac's Chief Executive Director, Raphael Mgaya, stated that the oil prices entering the market in July will be lower. He attributed this to their procurement of oil at cheaper rates in the global market compared to current prices.

However, Mgaya emphasized that the current price reductions do not accurately reflect the actual importation costs incurred by companies, particularly due to discrepancies in currency exchange rates used by Ewura, providing relief to consumers but burdening importers.

According to Ewura's report, the retail price of petrol imported through the Port of Dar es Salaam has decreased by Sh52.72 to Sh3,261 per liter compared to the previous month, while diesel dropped to Sh3,112 from Sh3,196.

Despite the price decreases, petrol remains at its highest levels in the past five months, from December 2023 to March 2024.

Ewura attributes the declining fuel prices to a decrease in the prices of refined oil in the global market (FBO) by an average of 11.82% for petrol and 7.77% for diesel

There has been a reduction in importation costs by an average of 2.26% for petrol and 8.51% for diesel at the Port of Dar es Salaam.

However, Mgaya noted that due to the scarcity of US dollars, importers have resorted to using Euros for oil imports, impacting local prices. He explained that while the dollar is readily available in the informal market, it is more expensive compared to official rates.

As Tanzania grapples with the dollar shortage and anticipates a decline in oil prices, the impact of fuel price rises hits hard, especially for citizens in rural areas.

For many in these communities, where transportation costs are a significant part of their daily expenses, even a slight increase in fuel prices can lead to financial strain.

 From farmers transporting their produce to market to families traveling for essential services, the ripple effects of higher fuel costs are deeply felt.

In response to such challenges, African nations must explore sustainable solutions to mitigate the impact of fuel price hikes.

The Uganda pipeline project presents an opportunity for regional cooperation and energy security. By diversifying energy sources and investing in renewable energy infrastructure, countries can reduce dependency on imported fuel and shield citizens from the volatility of global oil markets.

Ultimately, addressing the root causes of fuel price hikes requires a multifaceted approach, including promoting energy efficiency, investing in alternative energy sources, and fostering regional partnerships for energy security.

 As Tanzania navigates the current challenges posed by the dollar shortage and fluctuating oil prices, proactive measures and collaborative efforts are essential to ensure the well-being and prosperity of all citizens, particularly those in rural areas who are most vulnerable to the impacts of fuel price fluctuations.