Why falling crude oil prices may not cut fuel costs in Tanzania

Tanzania started experiencing rising fuel prices in April this year following tensions in the Middle East, which disrupted oil infrastructure, including wells, storage facilities and refineries.

The disruption pushed up transport costs, commodity prices and service charges across various sectors.

In response, the government introduced a subsidy of Sh259 per litre of diesel to cushion consumers, citing its importance in supporting key economic activities such as industrial production, goods transport, and public transport services.

Commenting on the development, economist Oscar Mkude said movements in global oil prices do not automatically translate into immediate changes at fuel stations.

“Many people expect that when crude oil prices fall globally, fuel prices at stations will also fall significantly, but the reality is more complex,” he said.

He explained that final pump prices are shaped by cumulative costs along the supply chain, not only the cost of crude oil.

“These include purchase costs, transport, insurance for fuel-carrying vehicles, government levies and other operational expenses before a final price is determined,” he said.

Mr Mkude added that even when crude oil prices fall, other components in the pricing structure may rise, offsetting possible reductions.

“For instance, insurance premiums may increase, raising transport costs. A trader must consider all these elements. The role of a businessperson is to make profit. If they relied only on global oil price movements, they could end up making losses,” he said.

He noted that the Energy and Water Utilities Regulatory Authority (Ewura) plays a key role in reviewing cost components submitted by importers and setting price ceilings to balance interests of traders and consumers.

Mr Mkude made the remarks at a time when Tanzania’s inflation rate rose to 4.0 percent in April 2026, up from 3.2 percent in March, driven largely by increases in transport and food prices.

Economist, Dr Lutengano Mwinuka, said fuel pricing in Tanzania follows a formula that uses reference prices from previous months, meaning current prices reflect earlier market conditions.

“If the reference price was lower a month earlier, consumers may see some relief. If it reflects a period of higher prices, the outcome differs. It depends on the pricing formula, although there are signs of some easing,” he said.

Economist and business expert, Dr Eliaza Mkuna, said global oil price movements cannot be directly passed to domestic consumers due to several economic and policy considerations.

He said fuel stock levels play a major role, noting that fuel purchased at higher prices may remain in circulation before cheaper imports reach the market.

“The government also considers the impact on tax and levy revenues from the oil sector. Rapid price changes may affect revenue projections and broader fiscal planning,” he said.

Dr Mkuna added that not all global price movements are sustained, as some are short term fluctuations while others reflect longer term trends, requiring careful analysis before policy adjustments are made.

He said decisions must therefore be gradual and evidence based in the sector at times.