Iran War Fuel-Price Shock Is Catching Up With African Nations

Customers refuel vehicles at a gas station, operated by CPC-Egypt, in Cairo. Photo by Islam Safwat /Photographer: Islam Safwat/Bloom

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(Bloomberg) — The fuel-supply shock is starting to hit Africa, weeks after Asian nations reported shortfalls in stocks.

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Shortages have emerged at filling stations in countries including Kenya, Ethiopia and Zambia. In South Africa, petrol prices would need to jump almost 30% on April 1, with wholesale diesel set to surge more than 50%, in order to make up for an average under-recovery at the pump over the past month, according to estimates by the Central Energy Fund.

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The shock from the US-Israeli war on Iran, which has already triggered cooking-gas shortages in India, jet-fuel constraints in the Philippines and naphtha supply strains in Japan, is now set to ripple across Africa, raising transport and food costs in some of the world’s poorest economies. The impact has been slower to surface in part because many governments regulate fuel prices, delaying the pass-through of higher global energy costs.

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Some nations are cutting fuel levies and tapping support funds to cushion households — even as those measures erode already-stretched state revenue.

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“We direct government to address this matter to see how best we can address the challenges that South Africans are now going to face as the price of petrol and diesel go up,” South African President Cyril Ramaphosa said on Sunday at an African National Congress conference.

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Tanzania is strengthening border controls to stop the smuggling of fuel to its fuel-strapped neighbors, said the nation’s permanent secretary in the energy ministry, James Mataragio.

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Namibia said it will slash fuel levies for the three months through June, with the remainder of under-recovery of increases covered by its National Energy Fund. Similarly, Kenya, which relies on the Middle East for the bulk of its imports, will use its petroleum development levy to stabilize prices.  

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The one nation that has enough fuel is Nigeria, home to billionaire Aliko Dangote’s massive refinery. But it isn’t immune to rising prices. One local politician, Oyo state Governor Seyi Makinde, has pledged to give workers a transportation allowance for at least three months.

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The government is working on “flexible measures that help to slow down the rise in prices without creating market distortions,” Sanyade Okoli, special adviser to President Bola Tinubu, said in a text message. She didn’t disclose details. 

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Across the continent in Ethiopia, where long lines have formed at filling stations, the administration has encouraged the public to conserve fuel. State-owned Ethio Engineering Group is implementing measures to conduct meetings virtually and boost shuttle and pool transport services.

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Meanwhile in Zambia, the government is considering requests to waive excise duties and value added tax on fuel imports, Energy Permanent Secretary Ephraim Munshifwa said earlier this month.

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The effect of higher fuel prices can bring other dangers, and putting off appropriate adjustments can affect revenue, the International Monetary Fund said in a statement on Zambia.