Fuel shortage: Why govt moved to control prices

Fuel prices in Rwanda increased by an average of Frw30 per litre, sending   fears among Rwandans that the increase may trigger prices of other goods and services to also soar.

Fuel prices in Rwanda increased by an average of Frw30 per litre, sending   fears among Rwandans that the increase may trigger prices of other goods and services to also soar.

In Kigali City, Rwanda’s business hub, petrol increased by Frw19, diesel by Frw15 while the price of kerosene soared by Frw50 per litre.

Currently petrol is at Frw636 per litre from the previous Frw617; diesel increased from Frw605 to Frw620 while kerosene that used to be at Frw480 is now Frw580.

However to protect the consumers from paying more for fuel, the government intervened setting a price ceiling, above which fuel dealers are not to supposed to retail their oil products.

Wold over, retailers usually pass on to consumers increased cost.

Protais Mitali, the Minister of Commerce and Industry assured Rwandans not to worry. “There should not be cause for alarm. Government has done its best to keep the prices where they currently.”

John Paul Kalisa, the Private Sector Federation director of regional integration and trade was happy with government’s intervention in price regulation saying ‘it is quite good for the economy and the welfare of citizens.’

“Demand and supply if not put under control penalize the poor people,” he said.

State Minister for Energy and Communication, Eng. Albert Butare, earlier said that shortages are worldwide, so the government had done its best.

“We (government) cannot do any thing more on the prices”. “We are only sourcing for alternatives since Rwanda heavily depends on fuel for lighting and running industries.

We are currently building a fuel storage plant, and encouraging bio-gas developments to substitute kerosene,” Eng. Butare said.

Col. Dodo Twahirwa, head of commuter taxis owners and operators in the country, assured passengers that they will not increase transport fares in the country.

The arguments above are all up to protect the economy. Fuel price increase affects economies in the world but are not about to stabilise.

The weaker dollar has been driving up oil prices as investors have been using the commodity as an alternative to holding dollars.

Since oil is traded in dollars, the price increases maintain OPEC’s purchasing power in Europe.

The dollar’s current weakness against the Euro has also seen prices of other commodities rise sharply.

Growing turbulence in the Middle East, the world’s largest oil-producing region, has led to decreased exports where some economists attribute the dramatic fall in supply to greed, US pressure on Iran’s nuclear programme and instability in Saudi Arabia.

Other oil producing nations have experienced insurgences, such as the strikes and political problems in Venezuela and potential instability in West Africa all causing the decrease in the growth of oil supply leading to increased prices.

Nigeria’s oil fields (the sixth largest producers) have been attacked several times this year.

The effects of fuel price increases on a country’s economy if not checked vary from country to country depending on the level of development. However, the degree of affection to growing economies would be more disastrous. 

Production would be costly since fuel is used to run the industrial machines.

This could also cause delays in production due to limited supply. This explains why Eng. Butare, stressed the need to find alternatives to substitute fuel in case of limited supply.

The distribution of goods and services as well as raw materials will be tampered with.

It would mean either distribution at a high transporting cost or no distribution.

This would live the citizens in misery especially if essential products are the ones to be supplied.

Finally, citizens will be availed with highly priced products.

Since the products are highly priced, the consumption rate will be low.

This will lead to closure of industrials most especially the small and medium enterprises.

SMEs have a lot to play in growing economies notable in job creation.

Generally, the effects of fuel price increase on the economy retard its growth.

Its will negatively contributed to the country’s GDP downward trend consequently affecting the revenue that would have accrued to government treasury.

But with hopes of oil in Rwanda yet to be confirmed, the economy leaves to have a strong stand for further development.

Ends

 

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