Uganda Government: Fuel Price Explanation Cites Taxes, Shilling Depreciation

• The Ugandan government attributes rising fuel prices to global costs, increased taxes, and the depreciation of the Uganda Shilling.
• Minister Monica Musenero explained that the Shilling's depreciation alone added approximately UGX 300 per litre, while the Excise Duty (Amendment) Act, 2026, increased tax by Shillings 200 per litre for FY 2026/2027.
• Uganda operates a liberalised petroleum market, with prices determined by multiple factors, and the Ministry does not mandate uniform pump prices.
• While acknowledging varying costs for upcountry markets, the Petroleum Supply Department monitors for excessive or unexplained margins.
• The government is strengthening supply resilience through the Uganda National Oil Company and exploring alternative routes and regional storage infrastructure.

However, Musenero cautioned that while legitimate logistics costs are acknowledged, they should not be exploited to justify excessive or unexplained margins.

The Ugandan government has clarified that the recent escalation in domestic fuel pump prices stems from a combination of international market dynamics, local taxation policies, and currency fluctuations. Minister of Energy, Monica Musenero, presented a comprehensive Uganda government fuel price explanation to Parliament on Wednesday, detailing how various interconnected costs impact the petroleum supply chain. These factors range from global crude prices and foreign exchange rates to internal taxes and logistical expenses.

A significant contributor to the current cost pressures is the depreciation of the Uganda Shilling. According to the Ministry's assessment, the exchange rate shifted from approximately Shillings 3,790 per US Dollar at the beginning of September to about Shillings 4,035 per US Dollar recently. This movement alone accounts for an estimated additional cost of roughly UGX 300 per litre, purely due to the exchange-rate impact on fuel imports. Furthermore, the Minister highlighted the effect of increased excise duty on fuel. The Excise Duty (Amendment) Act, 2026 Uganda, implemented an additional Shillings 200 per litre on both petrol and diesel, effective July 1, for the financial year 2026/2027. This Uganda fuel tax increase 2026/2027, alongside the Uganda Shilling depreciation fuel and global petroleum price movements, has progressively driven up the cost reflected in the domestic market.

Despite public concerns, Minister Musenero firmly rejected proposals for a standardized pump price across the nation. She underscored that Uganda operates a liberalised petroleum market, meaning the Ministry does not dictate uniform pricing for oil marketing companies. Instead, prices are determined by a multitude of factors, including international product costs, prevailing exchange rates, specific procurement arrangements, transportation and logistics expenses, operational and financing overheads, competitive pressures, station ownership models, and the commercial margins sought by individual oil companies.

The Minister's statement also addressed significant discrepancies observed in fuel prices between urban centers like Kampala and more remote upcountry markets, particularly within the Karamoja sub-region. She clarified that such price variations do not automatically indicate unjustified mark-ups, as oil marketing companies incur diverse costs after receiving products at terminals in Kenya and Tanzania. For instance, a market surveillance conducted on September 8th revealed petrol selling at approximately Shillings 6,850 per litre and diesel at Shillings 7,099 in Moroto, contrasting with Shillings 6,650 for petrol and Shillings 6,800 for diesel in Kampala. This represented a difference of about Shillings 200 for petrol and Shillings 299 for diesel. However, Musenero cautioned that while legitimate logistics costs are acknowledged, they should not be exploited to justify excessive or unexplained margins. The Petroleum Supply Department actively monitors prices and intervenes with oil marketing companies when anomalies are detected.

Minister Musenero reassured Parliament that Uganda possesses sufficient fuel stocks to meet national demand, even amidst ongoing pressures in the international petroleum market. She identified global price escalations as being influenced by disruptions to production and transportation in the Middle East, constraints on the supply of refined products, and restrictions impacting international fuel trade.

To bolster supply resilience, the government is implementing several strategic initiatives. This includes strengthening coordinated procurement and supply management through the Uganda National Oil Company (UNOC) supply. Furthermore, Uganda is actively engaging with Kenya on a Product Sharing Exchange Framework and exploring alternative supply routes via Tanzania, which encompasses plans for a refined-products pipeline and storage facilities at Tanga. The Ministry is also developing regional petroleum storage infrastructure, a move designed to reduce transportation costs by positioning bulk fuel closer to major consumption centers, thereby enhancing supply security and accessibility across the country.

Compliance officers and legal counsel for oil marketing companies in Uganda should review the implications of the increased excise duty from the Excise Duty (Amendment) Act, 2026, and assess pricing strategies in light of Shilling depreciation and global costs, particularly given the Ministry's monitoring for 'excessive or unexplained margins' in a liberalised market.

Source: Reporting based on government statements in Uganda.