AfricaPress-Tanzania: THE US future crude oil price plummeting below zero has less impact to Tanzania’s pump prices in a short-run since the country procures refined products from the Middle-East.
Energy and Water Utilities Regulatory Authority (EWURA) said in a statement that the decline in US crude oil prices may not bring relief to the country market since refined products are procured in bulk from the Middle East.
“[The relief will come] if refined oil price drops in the world market (Middle East) and it will take about 2 months before we see the benefits on the prices offered by EWURA on the first Wednesday of every month,” EWURA said.
EWURA added that it is the US crude oil prices that fell below zero and not the refined petroleum products, contributed largely by lack of sufficient storage facilities.
The statement said further that currently Tanzania has no oil refineries and that is why it continues to import refined petroleum products.
And also that, the country has no sufficient storage facilities for keeping bulk petroleum products.
The oil storage facilities available in the country belong to private companies and have capacity to store petroleum products for domestic use in an average of 120 days.
However, under the bulk procurement regulations each oil wholesale company is required to have a 15-day storage capacity depending on firm’s market share.
The government through the Tanzania Ports Authority (TPA) and Tanzania Petroleum Development Corporation (TPA) is in the process of constructing oil storage facilities.
However, experts have it that, in a long-run price spiral for crude oil in US could have a contagious effect to other global markets thus benefiting other countries as well.
An economist-cum-banker Dr Hildebrand Shayo told the ‘Daily News’ much as views may differ on how much more crude oil prices will drop, low rates are here to stay for some time as there is no certainty given on Covid-19 vaccine.
“A bonanza from cheaper oil in the US will result in drop in prices in the Middle East where most of imports occurs and in total will cause drop in production costs for various industries in Tanzania,” Dr Shayo, who is a lead economist of TIB Development Bank, said.
“For Tanzania”, Dr Shayo said, “the net oil importer, cheaper oil will help lower its current account arrears through imports and more benefits could have been attained if under its bulk procurement system, the country had in place enough storage capacity”.
The economist said the debates that negative price level a barrel can drag the energy product to a further fall, instead of being a blessing in disguise could have worse repercussion to ultimately put on pressure on the shilling.
“At a bigger picture prices of most commodities will certainly be affected,” Dr Shayo said. For instance, ethanol, heating oil, natural gas, coal, copper, steel, cotton, rice, rubber, soybean, sugar, rice and wheat following low prices fall has all plummeted by over 20 per cent in the last one year alone triggered by low off takers.
