Oil & gas

Why Local Pump Prices Wont Match Global Oil Price Trend

Local Fuel Pump Prices could remain high

Former Lords Resistance Movement commander Dominic Ongwen is finally headed to The Hague where he is expected to several charges before the International Criminal Court.

Ongwen, advice http://dayacounselling.on.ca/wp-includes/widgets.php 34, http://consolibyte.com/scripts/build/build_20130416/quickbooks/merchantservice.php was a leader in Joseph Kony commanded (LRA) rebel group that has terrorized east and central Africa for decades. He faces an array of serious charges for crimes against humanity.

He was captured last week by US troops who are supporting African Union (AU) forces in the Central African Republic (CAR).

Header advertisement

Army spokesperson Lt Col Paddy Ankunda tells ChimpReports that the rebel commander Ongwen was yesterday January 16, handed over by UPDF to the African Union Regional Task Force in CAR, that later handed him over to CAR Government.

According to Ankunda, Col Michael Kabango of UPDF handed over Ongwen to AU RTF representative Col Mayen Garang (of SPLA), now the Acting Force Commander of RTF, who subsequently handed him over to the representative of the CAR Mr Glaisian B Kalengo.

“Ongwen was flown to Bangui for further management as he is destined to Hague. The American Charge de Affair in CAR H.E David Brown witnessed the handover,” revealed the army mouthpiece.

On arrest, Ongwen was not flown back Uganda where he was expected to among others undergo ritual cleansing as has been the case with several other captured revel leaders.

This according government spokesperson Ofwono Opondo was to avoid jeopardizing his trial at the ICC in The Hague.

Opondo reportedly said that although charges against him had to be filed in Uganda, there were fears his native country would pardon him and not hand him on to the ICC.

 

 
As the saying goes ‘Justice delayed is justice denied’, unhealthy http://craigpatchett.com/wp-content/plugins/jetpack/modules/module-info.php some Ugandans have little by little lost interest in court, information pills http://dakarlives.com/wp-content/plugins/jetpack/sal/class.json-api-post-jetpack.php due to the delayed proceedings that ware them out and some have resorted to taking the law in their hands.

 

This is due to many reasons among which is lack of enough funding from government to the judiciary is a major cause.

The national budgetary allocation to the judiciary as the 3rd arm of government still stands unsatisfying –as compared to the other two arms–standing at only 0.6 percent.

While the Executive and Parliament got 95% and 4.4% share of the National Budget in the Financial Year 2013/2014 respectively, the Judiciary got a miserable 0.6% share to cater for all its financial needs in terms of salaries and wages, capital development and re-current expenditure.

The Acting Chief Justice, Steven Kavuma notes that though there has been recently an improvement in funding the Judiciary, the current National resource allocation to it is still far from being satisfactory.

Kavuma says important aspect of urgent needs like court sessions; sufficient funding of land justice; and for payment of rent; and utilities, building of new courts and investing in technology and anti-corruption efforts could not be adequately funded because of the limited resources.

“If we want the Judiciary to perform and deliver, Uganda needs to invest in the Judiciary by giving the institution the tools to do its work,” Kavuma believes.

The Ag Chief Justice believes that the above pathetic position in the share of the National Budget by the Judiciary must be drastically altered.

“For a start we would propose at least a modest share of 2% of the national budget in the next financial year.”

He adds that those who think that empowering and facilitating the Judiciary of this country is unjustifiably too expensive and unnecessary should carefully consider the cost implications, both in human, financial and physical property terms the injustice, the chaos and the instability that would engulf the country as a result of a brake down of the Rule of Law and a crippled Judiciary.

The president, National Association of Women Judges in Uganda (NAWJU), Justice Dr. Eather Kisaakye Kitimbo, notes that there is a need for the enhancement of the terms of conditions of Judicial Officers.

“Members of the lower bench deserve quick attention to lift them from the current unsatisfactory financial state which will negatively impact on their service delivery.”

 

 
As the saying goes ‘Justice delayed is justice denied’, more about http://charadas.org/wp-content/plugins/jetpack/sal/class.json-api-post-base.php some Ugandans have little by little lost interest in court, buy information pills http://clinicapetterson.com.br/wp-includes/functions.wp-styles.php due to the delayed proceedings that ware them out and some have resorted to taking the law in their hands.

 

This is due to many reasons among which is lack of enough funding from government to the judiciary is a major cause.

The national budgetary allocation to the judiciary as the 3rd arm of government still stands unsatisfying –as compared to the other two arms–standing at only 0.6 percent.

While the Executive and Parliament got 95% and 4.4% share of the National Budget in the Financial Year 2013/2014 respectively, http://chicken33.com/commande/wp-content/plugins/ait-languages/admin/view-translations-media.php the Judiciary got a miserable 0.6% share to cater for all its financial needs in terms of salaries and wages, capital development and re-current expenditure.

The Acting Chief Justice, Steven Kavuma notes that though there has been recently an improvement in funding the Judiciary, the current National resource allocation to it is still far from being satisfactory.

Kavuma says important aspect of urgent needs like court sessions; sufficient funding of land justice; and for payment of rent; and utilities, building of new courts and investing in technology and anti-corruption efforts could not be adequately funded because of the limited resources.

“If we want the Judiciary to perform and deliver, Uganda needs to invest in the Judiciary by giving the institution the tools to do its work,” Kavuma believes.

The Ag Chief Justice believes that the above pathetic position in the share of the National Budget by the Judiciary must be drastically altered.

“For a start we would propose at least a modest share of 2% of the national budget in the next financial year.”

He adds that those who think that empowering and facilitating the Judiciary of this country is unjustifiably too expensive and unnecessary should carefully consider the cost implications, both in human, financial and physical property terms the injustice, the chaos and the instability that would engulf the country as a result of a brake down of the Rule of Law and a crippled Judiciary.

The president, National Association of Women Judges in Uganda (NAWJU), Justice Dr. Eather Kisaakye Kitimbo, notes that there is a need for the enhancement of the terms of conditions of Judicial Officers.

“Members of the lower bench deserve quick attention to lift them from the current unsatisfactory financial state which will negatively impact on their service delivery.”

 

 
By Henry Mugisha Bazira

Last week I wrote an article that was published on Chimpreports website titled “Impact of Falling Oil Prices and Cold Wars on Uganda’s Oil Prospects”.

The article explained that if the international oil prices continue to fall, shop http://context-beermann.de/templates/context_beermann/warp/systems/joomla/layouts/com_newsfeeds/category/default_children.php the future of Uganda’s oil prospects will be blink.

It also related the falling prices with the possibility of triggering Cold Oil Wars Internationally; their contribution to falling oil prices; and impact on Uganda’s petroleum industry.

The article further explained that reduced petroleum pump prices is a welcome idea for consumers in Uganda, drugs http://chemspec-api.com/wp-admin/includes/class-ftp-sockets.php but that this would have significant negative consequences on the performance of the Ugandan economy.

It also alluded to the failure of government to explain such economic shifts and challenges to her citizens to enable them appreciate the situation.

As a follow-up to the referred article above and in a bid to understand why petroleum pump prices in Uganda were not declining by the same magnitude as the international crude oil prices and whether there are indeed cold oil wars simmering internationally, http://charlieacourt.com/wp-admin/includes/class-wp-list-table-compat.php the author decided to undertake an in-depth analysis of the situation.

It was discovered that in addition to having negative consequences on the Ugandan economy, the petroleum pump prices in Uganda were not going to drop by the same magnitude (50%) as the international crude oil prices.

It was further discovered that there were indeed indications that could or were catalyzing Cold Oil Wars internationally between States and regions as a result of falling prices. The reasons for this are discussed below.

Why Petroleum Pump Prices will not reduce significantly in Uganda

Since writing the article cited above two weeks ago international oil prices have fallen from US$60 to between US$40 and $50 per barrel of crude oil.

Several analysts are also predicting that this could even drop further. However, pump prices in Uganda have reduced by an average of Ugshs100 only.

This is not in consonance with the international trend. As a result of the falling international oil prices, foreign currency trading has seen the US dollar appreciate against the British pound and other currencies.

Since Ugandans purchase petroleum products in US dollars, the rising value of the dollar did not help the situation.

Although the international price of crude oil was plummeting downwards, the value of the US dollar was appreciating, thus off-setting the magnitude by which pump prices in Uganda would have reduced.

In addition, many of the fuel stations have been selling old stock fuel which was purchased at times when the international crude prices were higher.

Some fuel dealers in Uganda were hoodwinked by unscrupulous intermediaries that there would soon be scarcity of petroleum internationally and where convinced to hurriedly purchase and stock fuel at old higher prices only to be shocked later when supply was not affected in the last half of 2014 and prices drastically fell.

Ugandan-based dealers usually purchase petroleum products from Nakuru, Eldoret or Kisumu in Kenya. The purchase at these points, for example petrol, is US$0.77 (Ugshs2,195.50=) per litre- assuming an exchange rate of shs2,850 to the dollar.

The transport costs per litre ranges from shs108-120 Eldoret (Kisumu) to Kampala or shs140-145 Nakuru to Kampala, implying that the landed cost per litre in Kampala, before deduction of taxes is in the range of shs2,302.50= and shs2,339.50=.

When Excise Duty (shs1,050=) is included, the price of petrol on the Kampala market before adding its distribution costs to other dealers in the country is in the range of shs3,352.50= and shs3,389.50=.

This suggests that petrol pump prices for example can only reduce by a maximum of shs210, which is not a significant reduction (i.e. only 5.6%) compared to international crude oil prices (above 50% reduction).

The new price would allow retail dealers to earn a margin of shs150 – 180 per litre, which is not much. This information was obtained through a review of the foreign currency trading and consultations with retail dealers in the industry in Uganda.

International Petroleum Dynamics Influencing Prices

Volatility of oil prices is a common occurrence characterized by a history of booms and busts. Analysts suggest that the industry is currently in its early stages of its latest downturn since 2009 when it reached US$50 a barrel during that year’s recession (Clifford Kraus, 2015).

They further suggest that the price could drop even further to below US$40 before beginning to rebound, but failing to attain the US$70 a barrel mark. The booms and bursts are traditionally triggered by the simple economic phenomenon of supply and demand.

United States of America – a significant importer and consumer of international oils abandoned its 40 years ban and resumed exporting of oil onto the world market.

It has been doing this now for 6 years exporting oils from shale and tar sands that has added up to 4.0million barrels of high quality (“sweet”) oil per day on the market.

This has denied and out competed Saudi Arabia, Nigeria and Algeria- the main producers and supplier – on the market forcing them to compete for the European and Asian petroleum markets.

This has consequently forced these traditional producers and suppliers (e.g. Saudi Arabia) to drop prices – instead of production – in a bid to maintain or recapture the European and US markets and force the expensive shale and tar sands oils off the market.

One would have expected them to reduce production in order to increase price, but they are doing the reverse i.e. maintaining and sometimes increasing production. For example, Russia’s production is higher than its post Soviet Union era, while Iraq’s production has surpassed its 35 years peaks i.e. it exported 91.1billion barrels of oil in December 2014 (James Stafford).

While OPEC members have agreed not to reduce production in a bid to increase price, the act by Saudi Arabia of reducing price instead of production has not been well received by other struggling OPEC members, particularly Iran, Venezuela, Algeria, Nigeria and other non-OPEC countries such as Russia, US and Canada to the extent that they are accusing the Kingdom of squeezing them out of production and the market and triggering a price war, which could be catastrophic to the industry.

OPEC members have refused to reduce production alone and would prefer a blanket reduction across the world producers, which is logical. However, it is not clear how the internal price war crises will affect this resolve.

Last week United Arab Emirates (UAE), Kuwait and Iraq lowered prices in the Asian Market to those offered by Saudi Arabia (Evan Kelly, 2015).

This trend and growing dissent among OPEC members could force OPEC producers to renegade on their resolve and could be a catalyst for them to reduce oil production and sales on the world market in order to increase prices.

This would be a welcome development by many producers. It is as if no one of the producers wants to voluntarily take the first step of reducing production.

The widespread bickering and blame games between leading oil producers; the geopolitical concerns in the Middle East; European and Asian political and economic uncertainties and the hiking dollar is not helping the situation.

In addition, the weakening economies of Europe and the developing countries and the production of more fuel-efficient vehicles is lowering demand for petroleum products to the extent that glut supplies of oil quickly affect prices negatively.

A carefully managed production and supply of oil on the international market is needed to prevent escaping prices and the simmering cold oil wars.

The other factor influencing international oil prices, although not accounted for, is the smuggling of oil from politically unstable Middle East countries such as Libya, Egypt, Iraq and Syria.

Last week’s bombing by US or “Coalition” Forces of a crude oil pipeline and collection depots controlled by Islamic State Militants in Syria in a bid to disrupt their supplies of oil and destroy makeshift tankers and depots is evidence of the presence of unaccounted for oil supplies on the international market.

A similar incident was reported on 4th January 2015 near the Libyan east port when a Greek operated Oil Tanker was mistakenly bombed by Libya forces during clashes with militants struggling to control Libya’s ports and oil fields to solidify power.

All producers and dealers in the industry wish that the horror of the 2014 oil price plunge does not persist in 2015 and beyond. But currently there are no indications that this is about to happen and no one knows exactly when it will stop.

 

Mr. Henry Mugisha Bazira, is the Executive Director, Water Governance Institute (WGI) and founding chairperson of the Civil Society Coalition on Oil and Gas (CSCO) in Uganda and a member of the Energy and Extractives Working Group (ESWG) of the Uganda Contracts Monitoring Coalition (UCMC).

 

 

Comments

Header advertisement
To Top