Tanzania fuel shortage

August 4,  2011

In 1890, Alfred Marshall, whose contributions to Economics certainly should have won him the Nobel Prize in Economics (had it existed), published the influential Principles of Economics in which he introduces the concept of supply and demand, among other relevant economic concepts.

Today, about 121 years after Marshall introduced these simple and powerful concepts of supply and demand, Tanzania’s Energy & Water Utilities Regularity Authority (EWURA)  http://www.ewura.com/ , has recently issued a directive requiring fuel suppliers in the country to adhere to the following prices; TShs 2003.79 for Petrol, TShs 1910.84 for Diesel and TShs 1904.53 for Kerosene.  Please note that all these prices are prices at the pump and were effective from August 3rd.

Marshall’s brilliant supply & demand analysis would predict that imposing this artificial price, below the prevailing market price, would cause some suppliers to decrease supplying at this new price, and most importantly, would increase demand causing a net shortage of the commodity.  Well, abracadabra, Marshall’s magic is exactly what is going on right now in Dar es Salaam and throughout the country.

Some suppliers have refused to supply fuel at these new lower prices.  Demand has soared (or at the very least remained the same).  And the end result is that there exists a shortage of fuel.  Today’s Guardian newspaper ran this fuel crisis as its headline on its front page, noting that Mbeya faces the most acute shortages where many motorists have had to leave their cars at home.  In addition, this fuel shortage has not only affected the well-off in our society that have cars, but also those that use public transport (including yours truly).  Today’s Guardian goes on to report spikes in taxi fares as buses have become less frequent in almost all routes in Dar and thus demand for taxis having gone up.

EWURA, of course, is not taking this lying down and has threatened that any fuel supplier who refuses to implement this directive will risk losing their licences to supply fuel in the country.  In this fight, although the government thinks they are Goliath, it is in fact the fuel operators who are Goliath and the government David.  And I do not think David will win this one.  In fact, closing down these fuel suppliers, will only shorten supply even further and create further uncertainty for business (not to mention for the common mwananchi).  Buses, finding it difficult to get fuel, will run less frequently, causing massive commuter problems, definitely raising dala dala fares (which also have a price ceiling imposed on them), taxi fares will go up further (as is the status quo), and might have far reaching consequences beyond the transport sector, to involve food distribution across the country among other critical sectors (not to mention fuel demand from those operating electric generators).


mwananchi =citizen

dala dala = share taxi  http://en.wikipedia.org/wiki/Dala-dala


If you want to know how cities are built to reduce traffic read about Tanzania’s new Capital Dodoma here:

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