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Getting TPDC back to oil trade good for economy
2008-07-05 09:44:59
By Editor
Some eight years ago, under pressure from the International Monetary Fund (IMF) for the country to implement the so called structural adjustment programmes (SAPs), Tanzania religiously succumbed to the idea of liberalising the oil sub-sector.
Orders from the IMF just went too far, because even the government\'s oil importing agent, the Tanzania Petroleum Development Corporation (TPDC) was told to stop oil dealings, and allow private companies man the show.
Although the mandate of the corporation has remained essentially the same, to spearhead, facilitate and undertake oil exploration and development in Tanzania, it is now, in rather hard way, coming to our attention that the withdrawal of TPDC from oil trading as a matter of national trade policy was most crude.
At that time, liberal-tilted thinking excessively assumed that a free market would create strong incentives for so many companies to enter into oil importation and domestic retail chains.
Consequently, market prices for both bulk and retail oil products would stabilise over time, even as the laws of economics ensure interaction of supply and demand naturally establish security of national stocks.
However, most recent turbulences in global oil markets, much so exacerbated by strong demand for the product from fast growing Chinese and Indian economies, have come to alert us that over the longer runs, things will never always be the same again.
Our ignorance about globalisation and liberalization, and its sins which are now seen in ever rising prices of oil, in some part of Tanzania almost on daily basis, is the reason we should now immediately allow TPDC re-entry into oil business.
After all, getting back TPDC into oil business does not in any case contradict the liberal laws, for it will add steam to competition.
In addition, because TPDC has remained a government agent, it will most obviously challenge claims of price collusion by existing players and help establishment of some discipline and stability within the sub-sector.
An energy strategy seeking TPDC back to business followed the unprecedented, three years long oil price hike, which threatened to knock off the national economy.
We are told TPDC has so far prepared a business plan and promptly submitted to the cabinet a paper on oil trading and strategic petroleum reserve procurement scheme.
The Cabinet is also known to have reviewed the proposals after which TPDC was directed to submit implementation report. Now action is needed, as a matter of urgency.
Indeed, the public is eagerly waiting to hear that TPDC oil importation working capital is taken into account in the forthcoming financial year.
It is our expectation that TPDC would revert to its experience and maximise use of its facilities to ensure that the entire country continues to get stable supplies of petroleum products all the time, by making use of its filling facilities in Musoma, Singida, Shinyanga, Tanga and Handeni.
At the same time, the Energy and Water Regulatory Authority (EWURA) should urgently ensure implementation of the bulk oil procurement strategy which has been proved to be useful elsewhere in Africa in stabilising retail prices.
Once oil importation is carried out by one entity or through joint efforts by oil importing companies, it is possible to so realise great savings through the effect of economies of scale, with ultimate probability of lowering consumer prices.
Together such a strategy would allow authorities to collect accurate oil importation data for taxation and other purposes, as well as help curb inflation.
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