Tanzanians to use Sh21bn on oil daily

Dar es Salaam. Tanzanians will be spending more than Sh21 billion every day on petroleum products in the next five years as fuel consumption is set to rise dramatically, fuelled by an abrupt shift in lifestyles.

The projected oil expenditure is an increase of almost 50 per cent from the current level of spending. It is hoped that the amount will be far more than the Sh21 billion as prices of petroleum products may be going up depending on global prices and the value of the local currency.

The Petroleum Importation Coordinator (Pic) estimates that Tanzanians currently use around three million litres of petrol per day, five million litres of diesel and 300,000 litres of kerosene.

This translates to Sh14.34 billion spending using the February cap prices in the commercial capital Dar es Salaam.

However, industry players are projecting that the daily demand of petrol and diesel will increase to four million litres and eight million litres respectively with kerosene also seen at 400,000 litres in the next five years, according to Pic.

Going by the current regulated prices of the Dar es Salaam city as announced by the Energy and Water Utilities Regulatory Authority (Ewura) on February 4, BusinessWeek calculations indicate that the daily spending by Tanzanians will be over Sh21 billion in the next five-year period.

“We see an increased buying and usage of cars and other vehicles, a trend that will drive up the oil consumption in Tanzania,” says Michael Mjinja, the Pic general manager. Pic is responsible for administering the importation and supply of petroleum products in the country.

“Powered by improving roads, many people are now opting to drive upcountry from Dar es Salaam and this will actually accelerate the fuel consumption,” he says.

The number of vehicles being registered in Tanzania went up by 121.68 per cent during the past six years, according to data produced by the Automobiles Association of Tanzania (AAT).

According to AAT, a total of 147,499 vehicles were registered in Tanzania in the year 2009 while the number went up to 326,979 vehicles in 2014.

This suggests that Tanzanians registered an average of 893 vehicles each day in 2014 – up from an average of 740 vehicles in 2013 and 480 vehicles in 2012.

Analysts say the increase in the number of vehicles being imported into the country stems from an improvement of the country’s economy, coupled with the coming of newer ways of making payments.

“Gone are the days when one was obliged to possess hard cash to buy a vehicle…many people now buy vehicles through loans from commercial banks and Savings and Credit Cooperative Societies,” said Prof Semboja Haji of the University of Dar es Salaam.

With the growing economy, the number of Tanzanian workers who fall under the category of people that would see a vehicle as a necessity rather than a luxurious product is on the increase.

This, according to the Economics professor, is happening at a time when prices of vehicles have largely stabilized. “A combination of these factors, plus a deteriorating public commuting system, have resulted in a complete change in lifestyles and now, most young Tanzanian graduates regard a personal vehicle as a necessity,” he said.

Oil imports were $3.656 billion (Sh6.215 trillion) or 33.5 per cent of all imports in the year ended December 2014, according to the Bank of Tanzania.

That was lower than $4.308 billion (Sh7.323 trillion) oil imports which accounted for 39.1 per cent of the 2013 imports, the central bank data shows.

The decrease of the oil import bills is due to the fall of crude oil by almost 50 per cent in the world market between July 2014 and February 2015.

Tanzania imports refined petroleum products under the Bulk Procurement System and both local wholesale and retail prices are regulated by Ewura.

Prices are capped at some levels to reflect the changes in the world market, performance of the local currency against the US dollar and taxes to ensure that oil marketing companies also get profits.

The system is said to have stabilized the oil supply in the country and do away with frequent shortages the country had been experiencing before.

The system is also cost effective with demurrage charges going down from $45 before to below $2 currently, according to Mr Mjinja.

No Refinery

Tanzania is a net importer of refined petroleum products for consumption since 2000 when its refinery was closed at Kigamboni.

The idea of having a refinery plant seems to be out of date as the industry players see no immediate profits.

“I remember Kenya had a refinery in Mombasa but it was closed and now they are importing refined petroleum products. Zambia has one but it’s struggling,” says Mr Mjinja.

He says, for the refinery plant to be profitable in Tanzania, the country needs to be sure of a broader market that covers all landlocked countries and neighbours.

In 2005, the country phased out leaded petrol, under Tanzania Bureau of Standard (TBS) specifications, and since then it has been importing and selling unleaded petrol.

The country is importing oil with low content of sulphur in both petrol and diesel.

Sulphur specifications have been reduced from the levels of 500 parts per million (ppm) to 50 ppm starting January this year.