Fuel Prices in Sudan Defy Global Decline

Sudanhorizon – Nazik Shamam

Several Sudanese states have raised fuel prices in recent weeks, citing higher global oil prices following the crisis triggered by the closure of the Strait of Hormuz and the repercussions of the conflict involving Iran and the United States.

Despite the subsequent decline in global fuel prices, domestic prices in Sudan have remained unchanged, sparking widespread public frustration. Citizens have called on the government to review fuel pricing, given its direct impact on the cost of goods and services and the broader economic burden on households.

Last week, Khartoum State implemented an unannounced 13% increase in gasoline prices, with the cost per liter rising from SDG 5,999 to SDG 6,647, despite the reopening of shipping through the Strait of Hormuz and the resulting fall in international fuel prices.

Global Prices Retreat

Global oil prices fell below $72 per barrel at the end of last week, reaching their lowest level since February 27, as shipping traffic through the Strait of Hormuz accelerated and tensions between the United States and Iran eased.

The decline followed an increase in oil supplies as vessels resumed normal transit through the waterway, alongside market speculation over progress in negotiations between Washington and Tehran.

Meanwhile, Sudan’s fuel market continues to face mounting pressure due to the instability of the Sudanese pound against foreign currencies and an ongoing dispute between some fuel import companies and the Ministry of Energy over the country’s new import mechanism.

Despite lower global oil prices and a slight improvement in the value of the Sudanese pound, domestic fuel prices have remained elevated.

Private Sector Imports

Former Minister of Energy, Engineer Ishaq Jamaa, believes that neither the decline in international oil prices nor the modest appreciation of the Sudanese pound has had any effect on local fuel prices.

Speaking to Sudanhorizon, Jamaa argued that allowing non-specialized private companies to import fuel has significantly contributed to higher prices. He explained that these companies typically purchase fuel on the more expensive spot market while sourcing foreign currency from the parallel market.

He stressed that fuel imports require a fully integrated supply chain, including procurement, shipping, unloading at ports, storage, transportation via railways, pipelines or road tankers, intermediate storage, and final distribution to fuel stations.

“All of these stages together form the supply chain, which requires technical and administrative efficiency, beginning with the purchasing process itself,” he said.

Jamaa explained that approximately 90% of global petroleum trade is conducted through forward contracts, while only 10% takes place on the spot market, where prices are generally higher.

He argued that Sudan’s recent decision to permit non-specialized private companies—without adequate storage, transport, or distribution infrastructure—to import fuel through the spot market while purchasing foreign currency from the parallel market has contributed to the depreciation of the Sudanese pound.

According to Jamaa, financing just one fuel tanker carrying 40,000 tonnes can significantly affect Sudan’s exchange rate, recalling a previous episode during the tenure of former Finance Minister Badr El-Din Mahmoud, when the exchange rate reportedly weakened from SDG 10 to SDG 28 per U.S. dollar.

He maintained that neither the slight appreciation of the Sudanese pound nor the decline in global oil prices has translated into lower fuel prices because imports continue to rely on expensive spot purchases and parallel-market foreign exchange, with all associated costs and profit margins passed on to consumers, fueling inflation.

Jamaa called for fuel imports to be returned to the Ministry of Energy, through the Sudan Petroleum Corporation, and urged the government to secure state-to-state forward supply agreements, particularly with Gulf producers led by Saudi Arabia.

Automatic Pricing Mechanism

Oil affairs journalist Abdel Wahab Gomaa offered a different perspective, attributing the lack of a price decline to the suspension of Sudan’s automatic fuel pricing mechanism.

The mechanism, introduced in 2020 as part of a broader economic reform program supported by the International Monetary Fund (IMF) and the World Bank, was designed to allow domestic fuel prices to rise or fall in line with international market conditions after exchange rate liberalization.

Gomaa said the mechanism had previously enabled fuel prices to respond more flexibly to global trends while reducing the impact of exchange rate volatility.

“Before 2020, fuel prices in Sudan continued to rise even when global oil prices declined because of exchange rate instability and broader economic distortions,” he noted.

He added that the recent modest improvement in the Sudanese pound has not benefited consumers due to the ongoing effects of the war and continuing import challenges.

Reliance on the Spot Market

Gomaa also revealed that Sudan currently imports its gasoline and diesel through the spot market, which is considerably more expensive than long-term forward contracts.

He noted that diesel and aviation fuel markets remain under pressure globally due to the Strait of Hormuz crisis and the shift of many refineries toward supplying Asian markets.

Tax Burden

According to Gomaa, government taxes now account for approximately 33% of the retail price of fuel.

He argued that ensuring stable supplies requires launching an international tender with major global suppliers to secure reliable fuel imports at competitive prices.

He also recommended expanding fuel storage capacity, upgrading handling and unloading facilities at Al Khair Oil Port, and undertaking a comprehensive rehabilitation of the Khartoum Refinery in partnership with the China National Petroleum Corporation (CNPC).

In parallel, he proposed reaching an agreement with South Sudan to supply crude oil to the refinery, with rehabilitation financed through revenues generated from transporting and processing South Sudanese crude via the Al-Jabalain terminal and Bashayer Port on the Red Sea.

Is a Price Reduction Likely?

Based on the assessments of the experts interviewed, a significant decline in Sudan’s fuel prices appears unlikely under current conditions. The challenges range from the suspension of domestic refining operations and the deterioration of the Khartoum Refinery to reliance on costly spot-market imports and high government taxes.

The experts conclude that sustainable price stability will require a comprehensive review of fuel import policies, including the adoption of government-to-government supply agreements with producing countries and the rehabilitation of Sudan’s domestic oil infrastructure to reduce costs and ease the financial burden on citizens.

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