Recently it has been common to see a long queue of vehicles around petrol stations in Addis Ababa searching for fuel, particularly gasoline, commonly known as ‘benzene’. People including taxi drivers and other private vehicle owners run here and there filling up their tanks if they get lucky. The lineups near the stations have exacerbated the high traffic jams that are already annoying people throughout the city.
With the much publicized economic growth in the past decade and huge federally funded infrastructure projects, like the Ethiopian Great Renaissance Dam along with new railways, the need for increased fuel supply is crucial and consumption has been rising every year. To make fuel distribution more efficient the Ethiopian Petroleum Enterprise and the National Petroleum Depot Administration merged in July 2012 to form a new entity, The Ethiopian Petroleum Supply Enterprise (EPSE) that would be solely responsible for purchasing and supplying the nation’s fuel, while at the same time maintaining a reserve supply of 15 days. EPSE has 13 depots, throughout Ethiopia, and two branch offices, in Djibouti and Sudan.
After the two enterprises merged, petroleum products, the country’s second largest commercial energy resource, increased immensely. Data from the EPSE shows that in 2012/13 alone, the country imported 2.3 million MT of petroleum products at a cost of USD2.19 billion. Unlike previous years, the volume of imported petroleum products showed a 13.3Pct increase when compared to the prior year. This is higher than the 6Pct increase observed in the 2008/09 fiscal year, which is the largest spike ever registered.
Officials at EPSE pointed their fingers at issues with transportation and distribution of petroleum products, for the recent gasoline shortage rather than a supply deficiency. “The problem has nothing to do with the supply of the commodity; it occurred due to failures in transportation and distribution,” Kumera Baissa, head of the Planning and Organizational Service at EPSE told EBR.
Logistics and transportation difficulties have been the major challenges in Ethiopia’s import and export trade. This now is being seen in fuel transportation. Petroleum is perhaps the most critical commodity because of its far-reaching impact on the overall fate of the country’s economy and people’s everyday lives. After the crisis, the Ministry of Trade (MoT) summoned stakeholders to work on a solution but the meeting ended in a stalemate.
To begin with, oil retailing companies aren’t content with their profit margins from selling fuel. In the consultative meeting they held with officials at MoT, they raised their dissatisfaction about profits as a primary grievance. As the costs of running the business and the investment capital went up their profit margins from selling oil went down. Despite the fact that domestic retail prices of petroleum products are adjusted monthly, in line with oil price movements on the world market, the profit margin they earn from each liter of petroleum they sell has decreased, even when compared to the profits they used to earn over the past thirty- forty years. Currently, oil retailing companies in Ethiopia earn a profit margin ranging between four to 10 cents per liter on average. With this small profit they get by retailing petroleum products, oil companies barely survive. To keep afloat they rely on the small profit they get from selling lubricants alongside their fuel, a business manager at one of the oil companies told EBR, on conditions of anonymity. “That is why the multinational oil companies are exiting from the business,” he added.
Ethiopia purchases petroleum products from two sources; bilateral agreements with foreign governments and international auctions for private oil companies. Currently Ethiopia buys petroleum products from the Kuwait Petroleum Corporation and Sudan through these bilateral agreements. Meanwhile, Bakri International Energy Company limited of Saudi Arabia and Independent Petroleum Group of Kuwait are private supplies of the commodity. Ethiopia imports much of its gasoline (benzene), the plan is to import close to 75 Pct, from Sudan. The remaining benzene and jet fuel comes from Kuwait, both from the government owned company (Kuwait Petroleum Corporation) and from a private company based in Kuwait (Independent Petroleum Group). Diesel oil is purchased from Bakri International Energy Company limited of Saudi Arabia.
But the primary challenge for the current shortage of fuel is the shortage of trucks to transport it from the port of Djibouti or Khartoum, that then haul and distribute the commodity all over the country. One possible solution would be adding new trucks to the existing fleet. However, to import trucks incentives are needed. It can’t be profitable to import trucks without any incentives on duties and taxes as well as credit facilities; many transporters have told policy makers. The government currently is giving no transportation incentives as currently banks are prohibited from providing credit services for importing trucks or their spare parts. Neither does the government give any incentives on duties and taxes for importing trucks.
An official at MoT hopes that the railway, which is under construction, will alleviate the challenge in the near future; using the available trucks efficiently and effectively is the choice at hand. “With efficient use of the trucks and better logistical management, such as faster loading and unloading of trucks, it is possible to solve the problem,” he says.