By August Nuwagaba
The rise in price of fuel is global phenomenon and has been caused by three major factors namely;
1. Disruption in the global supply chain. The COVID-19 pandemic caused restrictions in the supply of oil production. Production was restricted, resulting in short supplies.
2. Resurgence in global demand: when the economes were opened, the oil supply remained the same at COVID perid levels, hence putting pressure on price. In the US for example, the price of crude oil rose by $120 from $40, implying a rise of $80 per barrel.
3. Tax regime: Kenya has for example recently imposed a tax on each litre petroleum products. Secondly, the Kenyan government removed subsidies previously on petroleum products, which has pushed prices of oil products high.
4. The COVD-19 test requirements worsened the already restricted disrupted supply chain which caused delayed movements of oil products to the country, hence high prices.
5. The effects is that high prices of oul products are inflationary. This will drive the price of every other commodity because of hgh transport costs, manufacturing costs etc.
6.The solution is to cushion the country against such shocks. THATS WHY THERE IS need for OIL RESERVES to cater for such stop gap measures.
The writer is a veteran Economist