Uganda needs more fuel storage facilities to manage high fuel prices

Makerere University Business School hosted Daniel Mushabe Managing Director, Meru Petroleum Uganda Limited a marketing professional with over twenty years in the fuel industry during a zoom online engagement that started at 7am-8am. He discussed the effects of high fuel prices on businesses as it pertains to business resilience.

Daniel Mushabe, the Managing Director of Meru Petroleum Uganda Limited, recently addressed a gathering where he shared insights on the evolution of Uganda's fuel industry over the past two decades and its impact on the economy and society. He began by reflecting on his 20-year journey in the fuel industry, marking his significant experience in this sector.

Mushabe delved into the effects of rising fuel prices in Uganda, comparing the situation twenty years ago to the present day. He highlighted the remarkable increase in fuel consumption, with Ugandans having consumed 100 million litres of fuel two decades ago, while today consumption ranges between 186 million and 200 million liters. This surge in consumption indicates the growing importance of fuel in various sectors of the economy.

He then turned his attention to the players in the fuel industry. Two decades ago, well-known names like Shell, Total, Caltex, and Agip dominated the market. However, the landscape has shifted, with Shell transforming into Vivo Energy and the entry of numerous new players, including Meru Petroleum Uganda Limited, where Mushabe holds the position of Managing Director.

Discussing accessibility, Mushabe noted a significant improvement over the years. In the past, acquiring fuel necessitated a trip to urban centers, but today, petrol stations are ubiquitous across the country. To illustrate this point, he cited the transformation of Rushere, a town in Western Uganda, from having just one fuel station two decades ago to now boasting ten stations.

Mushabe also discussed storage facilities, focusing on the national facility in Jinja, which underwent periods of dysfunction. However, the facility's renovation and upgrading by UNOC, the commercial arm of the Ugandan government, promises to enhance fuel security in the nation. He acknowledged that although further improvements are needed, the development signifies progress in the right direction. Additionally, he highlighted independent players like Bahaati, who operate a sizable storage terminal and transport fuel via ships, showcasing the industry's diversification.

Shifting gears, Mushabe outlined the factors contributing to fluctuating fuel prices. He emphasized that fuel prices are globally determined by the interplay of supply and demand. OPEC's decisions, especially post-COVID-19 production cuts, have impacted prices, as have geopolitical events such as the Russia-Ukraine conflict and past election-related disturbances. He also noted how approaching holidays like Christmas can lead to temporary price hikes.

Mushabe dissected the components driving price increases, highlighting factors such as unfair taxes, exchange rate fluctuations, market speculation, environmental regulations, trade dynamics, and transport costs. He pointed out that these challenges collectively contribute to the volatility in fuel prices.

The consequences of escalating fuel prices were then elucidated. Consumers with thin profit margins bear the brunt, and supply chains experience disruptions due to higher costs. This often leads to reduced profitability for businesses and changes in consumer behaviour and purchasing patterns, as well as elevated operating expenses across various sectors.

In addressing these challenges, Mushabe proposed strategies for enhanced fuel efficiency, particularly in the realm of transportation. Furthermore, he advocated for Uganda to explore alternative energy sources to mitigate the reliance on conventional fuel during turbulent times. This, he believed, would reduce the nation's vulnerability to external disruptions.

Mushabe concluded by underscoring the need for substantial daily storage capacity to ensure Uganda's self-sufficiency in times of global upheaval. He estimated the requirement to be 7 million litres per day, underlining the importance of planning for long-term resilience.

In essence, Daniel Mushabe's address provided a comprehensive overview of Uganda's fuel industry transformation over two decades, the factors influencing price fluctuations, and the effects on the economy and society. His insights and recommendations underscored the need for strategic planning and diversification to navigate the challenges posed by the global fuel market.