Policy and Infrastructure Measures for Gasoline Price Stability in Tanzania

To stabilize gasoline prices in Tanzania and minimize economic impact on the population, a multifaceted strategy is essential. In April 2024, gasoline prices rose to 1.25 USD/Liter from 1.24 USD/Liter in March, with historical prices averaging 1.02 USD/Liter from 1991 to 2024. Key measures include stabilizing the Tanzania Shilling, establishing strategic petroleum reserves, investing in renewable energy, enhancing fuel storage and transport infrastructure, and rationalizing taxes. Projections suggest prices will reach 1.27 USD/Liter by the end of Q2 2024, 1.33 USD/Liter in 2025, and 1.37 USD/Liter in 2026. Effective policy and infrastructure improvements can mitigate these increases, ensuring long-term price stability.

1. Global Oil Prices

The fluctuation in global oil prices directly impacts the cost of gasoline in Tanzania. Global geopolitical tensions, supply chain disruptions, and decisions by major oil-producing countries influence these prices. For instance, the peak price of 1.60 USD/Liter in August 2022 can be linked to such global events, including the Russia-Ukraine conflict, which significantly disrupted global oil supplies.

2. Exchange Rates

The value of the Tanzania Shilling (TZS) against the US Dollar (USD) affects gasoline prices. Since Tanzania imports oil, a weaker Shilling means higher costs for importing gasoline. This exchange rate volatility adds to the overall cost of gasoline in the local market.

3. Inflation

General inflation trends in the economy contribute to the rising costs of goods and services, including gasoline. As inflation increases, the cost of production, transportation, and distribution of gasoline also rises, leading to higher prices at the pump.

4. Government Policies

Changes in taxation, subsidies, and other regulatory policies can impact gasoline prices. For example, a reduction in fuel subsidies or an increase in fuel taxes would lead to higher retail prices. While specific data on policy changes aren't provided, it's a crucial factor to consider.

5. Supply and Demand Dynamics

Domestic supply constraints and changes in demand for gasoline affect prices. High demand with limited supply capacity can push prices up. The historical average of 1.02 USD/Liter from 1991 to 2024 suggests that supply and demand have fluctuated over time, impacting prices.

Data-Driven Analysis

• Historical Prices: The average price from 1991 to 2024 was 1.02 USD/Liter, indicating long-term upward pressure on prices.
• Record High and Low: The peak of 1.60 USD/Liter in August 2022 and the low of 0.42 USD/Liter in December 1991 show significant volatility.
• Recent Trends: The increase to 1.25 USD/Liter in April 2024 from 1.24 USD/Liter in March 2024 indicates ongoing upward trends.
• Projections: Expected prices of 1.27 USD/Liter by the end of Q2 2024, 1.33 USD/Liter in 2025, and 1.37 USD/Liter in 2026 suggest sustained price increases driven by the aforementioned factors.

Tanzania requires a holistic approach involving monetary stability, strategic reserves, diversified energy sources, improved infrastructure, targeted government interventions, inflation control, energy efficiency, and international cooperation:

Stabilize Exchange Rates

• Policy Implementation: Implement monetary policies that stabilize the Tanzania Shilling against the US Dollar. This can include maintaining foreign exchange reserves and controlling inflation.
• Diversify Exports: Increase the export of goods and services to strengthen the Shilling, reducing the impact of currency fluctuations on fuel import costs.

Strategic Reserves and Supply Management

• Establish Fuel Reserves: Create strategic petroleum reserves to cushion against global oil price shocks. These reserves can be used to stabilize supply during periods of high volatility.
• Diversify Supply Sources: Secure fuel supply from multiple sources to reduce dependency on any single country or region, thus mitigating risks associated with geopolitical tensions.

Promote Alternative Energy Sources

• Invest in Renewables: Increase investment in renewable energy sources such as solar, wind, and hydroelectric power. This reduces dependency on imported oil and contributes to long-term energy stability.
• Incentivize Alternatives: Provide incentives for the adoption of alternative fuels and energy-efficient technologies in transportation and other sectors.

Improve Energy Infrastructure

• Enhance Storage Facilities: Develop modern fuel storage and distribution infrastructure to reduce losses and inefficiencies, ensuring a more reliable supply chain.
• Upgrade Transport Networks: Improve road and rail infrastructure to facilitate efficient fuel transport, reducing logistical costs and potential price increases.

Government Subsidies and Taxation Policies

Subsidize Critical Periods: Implement targeted subsidies during periods of high global oil prices to shield consumers from abrupt price hikes.

• Rationalize Taxes: Review and rationalize fuel taxes to balance between generating government revenue and maintaining affordable fuel prices for consumers.

Inflation Control

• Monitor Inflation: Adopt measures to control inflation, such as prudent fiscal policies and controlling money supply growth.
• Cost Management: Encourage cost management practices across sectors to prevent inflationary pressures from escalating fuel prices.

Encourage Energy Efficiency

• Public Awareness Campaigns: Conduct campaigns to educate the public and businesses about energy conservation and efficiency measures.
• Support Efficient Technologies: Provide incentives for the adoption of fuel-efficient vehicles and industrial machinery.

International Cooperation

• Engage in Regional Agreements: Collaborate with neighboring countries to create regional strategies for energy security and price stabilization.
• Participate in Global Markets: Actively participate in international oil markets and forums to stay informed and influence global oil pricing mechanisms.