Local fuel prices surge by 3%
Tanzania - Economic - 02-08-2010

Fuel prices are heading upward with latest statistics from Energy and Water Utility Regulatory Authority showing that local pump prices rose by an average of 3%. According to EWURAquotes latest indicative price, pump prices for petrol surged by 2.81% during the last 2 weeks of January 2010, while diesel prices rose by 3.23%. In Dar es Salaam petrol is now selling at TZS 1,570 per litre while for upcountry locations the price is TZS 1,720 above the indicative prices issued by EWURA. In its indicative prices issued during the week which ended on 7 February 2010 the regulatory body directed that local pump prices in Dar es Salaam should not exceed TZS 1,578, while for upcountry the cap price should be below an average of TZS 1,572. The latest statistics from the regulator also show that kerosene prices have gone up by an average of 2.86% last week with pump prices trading at TZS 964 per litre in Dar es Salaam and an average of TZS 1,200 for upcountry.
In its report, EWURA stated that the latest price increase has been mainly triggered by the surge of oil prices at the global market as well as the weaker TZS against the USD. However, generally, pump prices are still trading fairly compared to the indicative prices issued for both Dar es Salaam and upcountry regions. Though EWURA is seen as a regulator of prices, in reality prices are mainly determined by the market forces demand and supply as Tanzania continues to adopt the free market economy system. Tanzania consumes about 1.54m cubic metres per annum of petroleum products wholly imported from Mediterranean region, Arabian Gulf and sometimes from Durban, South Africa. Effective from January 2000, petroleum downstream sub-sector was liberalised enabling oil marketing companies to individually procure and trade petroleum products in accordance to their market requirements and setting pump prices based on the prevailing market forces.
At the global market, oil is currently trading at USD 76 per barrel an increment of 100% compared to USD 36 recorded in January 2009 when credit crunch sent price to a record low. According to the Petroleum Economist Magazine, January 2010 edition, all being well, 2010 should be a year of relative comfort for consumers of energy, although there may be touches of pain for producers. Natural gas prices will remain low because of abundant supply, which should, in turn, keep power generation costs low and assist recovery in big consuming economies. Oil prices should also remain affordable, because the fundamentals donquotet yet suggest any reasons for another bull run in the market. Demand for oil especially in the US, remains sluggish, even though the economy is on its way out of recession. And world oil supplies remain ample. OPECquotes spare production capacity, of 6m barrels a day, should be sufficient to cope with any surge in demand from Asia, at least for the next few years. And in the nearer term, the volume of oil held in floating storage more than 100m barrels should prevent rapid price inflation in the case of a faster than expected pick up in demand.
What this means for oil prices is, of course, an open question. OPEC believes USD 75 a barrel is fair. And that would probably satisfy other producers. Itquotes high enough for some developers in high cost regions, such as Canadaquotes oil sands and Brazilquotes deep waters. Even some consumers might grudgingly accept it. But many wonquotet: at a price of USD 75bn for the next 12 months, US drivers would be paying more than double what they paid for gasoline 10 years ago; on the evidence of recent months, this is enough to make them reconsider their driving or car buying habits. The higher oil prices go, the greater the trend towards conservation globally will be. As the worldquotes leaders look back on their promises in Copenhagen, itquotes a high oil price as much as anything else that will persuade populations to endorse new climate-change strategies. The world has already seen what a high carbon price can do to consumption: the oil market was at it well before politicians regulated any carbon levies. And it worked.

Source: IPP Media