In 1979 I remember along the Kampala-Jinja highway the few fuel stations – they cannot have been more than five, had no fuel. But every so often you would come upon a jerrycan by the roadside, often plugged by a finger of matooke, and filled with a liquid either red but more often green.
If you needed fuel you stopped at the jerrycan and someone
would emerge from the surrounding plantation or a nearby hut and you would
negotiate. You were often so relieved to see fuel, because by this time your
fuel gauge would be flashing red, its quality was the last thing on your mind.
I couldn’t help remembering this state of affairs from more
than 40 years ago, in the light of the fuel “crisis” we suffered in the last
week.
Truckers in protest over Uganda’s insistence they do a covid
test before entering the country, had piled up at the border causing a fuel shortage.
Prices hit record highs with reports of petrol in western
Uganda going for sh12,000 a liter!
"What we have known for a long time now, is that Uganda’s pain
threshold is considerably lower than 1979. A few stations out of fuel and it’s
a full blown crisis. Which is how it should be. When progress or development
happens, what are counted as bare essentials rises...
In 1979 no petrol in the stations, no sugar, no soda was
acceptable, try that now and see.
However, some of the solutions offered by politicians and
the public also show that what we learn from history is that we don’t learn
from history.
The suggestion by some sections that government should
control the price of fuel, was one of those. Thankfully government was not
entertaining the suggestion because it would cause more harm than good.
For starters it would aggravate an already bad situation,
increase the shortages and push the prices higher as a parallel or black market
in petrol emerges, a return to the days of the lonely jerrycan on the roadside.
It’s a simple supply and demand logic, when supplies fall,
demand rises and prices will follow suit. This is not a manmade law, it’s a natural
law and you can only subvert it temporarily and at great cost to yourself or in
this case to the economy.
The law of gravity will work whether you like it or not. But
for brief periods aeroplanes, for example, beat the law but at what cost?
A Boeing 737 weights about 70,000 kgs or 70 tons while fully
laden. To keep it in flight costs 3400 liters of fuel per hour. A truck hauling
the same amount of cargo would not consume 50 liters per hour.
The same goes with the laws of supply and demand.
"Politicians can huff and puff all they want but as long as there is an imbalance between supply and demand price will go where it will....
So while it looks like common sense for government to
dictate price, traders will look at the cost of bringing the fuel to market
compare it with government price. If it makes sense, meaning government price
is higher than cost the traders may supply but as soon as it shifts the traders
will turn off the taps or find a way to get their product onto the black market
and the price goes up anyway.
Reminds me of when government liberalisd the foreign
exchange market by allowing forex bureaux. The naysayers warned that even the
little forex we had would be sucked out of the economy. But the opposite
happened, more forex flowed in, the exchange rate found its level and the black
market disappeared.
So what to do about the fuel crisis, using the laws of supply
and demand?
Thankfully with agreement reached with the truckers, supplies
will be restored and prices will revert to the normal.
That being said a discussion around beefing up our national
reserves would be something parliament may interest itself in. As it stands I
hear we have fuel reserves, both public and private, to last us 10 days and this
figure is falling every day as our fuel demands increases.
An investment in increasing our reserve capacity beyond ten
days supply – The US petroleum reserves can last them a month at least, would
come in handy. The cost of storage is the price we will pay for trying to
rebalance the supply-demand equation when it goes awry.
Calls to dictate fuel prices or any prices for that matter, are
a knee jerk reaction that may be good for the headlines but are bad economics
that will invariably lead to a worsened political situation – ask Zimbabwe and
should not be entertained by reasonable thinking members of society.
