Why oil price fall not beneficial to consumer

30Jan 2016
Our Reporter
The Guardian
Why oil price fall not beneficial to consumer

It has been revealed that the government ‘siphons’ more than half the cash worth fuel sells from filling stations, apparently prompting motorists into paying the price.

Fuel is among the sources of revenue

Energy and Water Utilities Regulatory Authority (Ewura) has released data this week unveiling the scheme under which the government takes out 60 per cent tax disguised payments out of one litre of fuel sold at a filling station.

The discovery comes at a time when the public is awash with an outcry over the government’s failure to lower fuel pump prices even as the oil prices in the world market plunge into extreme depths.

Global oil prices have radically tilted to as low as Sh54, 815 ($25.11) a barrel this year from a record high of Sh218, 300 ($100) in 2014, according to issued recently by the regulatory authority.

While the world oil prices have been for a long time fluctuating between its historical lowest levels, consumer market prices in Tanzania have been stagnant throughout, with motorists paying Sh1,890 for a litre of petrol, out of which they simultaneously pay the state about Sh1,000, leaving only about Sh900 to operators of the filling stations.

According to Ewura, the 60 per cent controversial contribution to the state is worth a cluster of more than a dozen taxes embedded in one flacon.

They include Sh908.15 for Insurance and Freight (CIF), wharfage $10/MT +18 per cent Value Added Tax (VAT) equivalent to Sh19.28, railway development levy Sh22.56, customs processing fee Sh4.80, weight and measures fee Sh1.000 and Sh1.24 for Tanzania Bureau of Standards (TBS) charges.

Other include tipper fee for Sh0.20, actual demurrage costs Sh2.26, surveyors costs Sh0.15, financing costs Sh9.08 and regulatory levy worth Sh6.10. The list of costs incurred by a consumer at pump station also includes evaporation losses levy charges for Sh4.54, petroleum marking costs of Sh12.48, Fuel levy worth Sh313, excise duty of Sh339 and petroleum fee worth Sh100.

While petrol costs levy slapped on a litre of petrol stands at Sh752, and when other costs are added to it, amounts to Sh1, 997 per litre as a petrol pump prices, diesel CIF price attract around Sh879.35 and government taxes Sh628.
When combined with other costs as reflected in the petrol pump prices, the consumer price for a litre of diesel amounts to Sh1,823.

A recent report availed to The Guardian on Sunday revealed that the Organization of the Petroleum Exporting Countries OPEC countries daily gasoline basket price stood at $25.11 a barrel as of January this month.

Such countries include Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela, among whose list are major exporters to Tanzania.

According to the Tanzania Roads Fund Board (RFB) at least 97 per cent of all the revenues accrued for roads construction and maintaining in the country originate from fuel products.
In a statement availed to the media this week, Ewura Director General Felix Ngamlagosi said the fuel price at the world market is a major determinant of the pump prices in the country.
However, he said there are charges associated with fuel importation in the country such as wharfage, railway development levy, customs processing fee, weight and measures fee, and Tanzania Bureau of Standards (TBS) among others which amounts to the rising of fuel pump prices.

He said Ewura has regulated the price of fuel pump from Sh2,200 a litre in 2008 to Sh1,140 in 2009.

According to him, refining imported crude oil in order to get refined petrol is an expensive exercise that also adds to the cost of the pump price.

“The price of pump price in the local market depends much on fuel import costs of on ships with fuel which have been received in the same months but were bought the previous months” he said
He also pointed out that the authority uses a special formula to set pump price in the local market by involving all stakeholders in the sector before the prices are made public through the government newspaper.
The director said the ongoing fuel fall at the world market between 2014 to-date will gradually lead to the fall of price in the local market.
He said it is important for the public to understand that the refined fuel price fall at the world market contributes between 46 and 49 per cent of the fuel prices in the local market but it does not have connection with pump price.

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