Ethiopia has raised domestic fuel prices as part of efforts to rein in swelling energy subsidies and offset the effects of currency depreciation amid increasing global oil costs.
The Ministry of Trade and Regional Integration announced price increases of 34 percent for gasoline and 33 percent for diesel in the capital Addis Ababa that will take effect in the next three months.
Gasoline prices (locally known as Benzene) will rise to 117.28 birr per liter from 82.6 birr previously, while diesel will increase to 117 birr per liter from 84.74 birr.
However, consumers will see a softer price impact for the next three months as the government is subsidizing a portion of the hikes. Over the next three months, Ethiopians will pay 91.14 birr per liter for gasoline and 90.28 birr per liter for diesel in Addis Ababa.
The subsidy program is expected to cost over 100 billion birr (935 million dollars) this year for one of Africa's fastest growing economies. Adding payments expected to be paid for petroleum procured for the year, the total government expenditure for oil would be 250 billion birr (2.3 billion dollars), which the government intends to offset by reducing subsidies in the future.
Deteriorating currency and sustained increases in international oil markets have rendered the status quo unsustainable, according to trade authorities.
Quarterly price adjustments aim to gradually align domestic costs with global benchmarks while easing inflationary pressures. Officials are banking on understanding from citizens for the market-oriented reforms, which come as living expenses rise across the nation of over 120 million people.
The government has raised domestic fuel prices amid a period of volatility in global oil markets. In the last two months, benchmarks like Brent crude and WTI, a grade of crude oil that serves as one of the primary benchmarks for oil pricing, have fluctuated substantially due to geopolitical tensions and shifting demand forecasts, particularly regarding China's economic outlook.
Prices declined in September, with Brent falling 7.29 percent month-over-month to 71.78 dollars per barrel. However, values have since rebounded and as of October 8 stood at approximately 81.08 dollars for Brent and 77.14 dollars for WTI.
Decline in China's oil demand has significantly impacted global oil prices. In 2024, forecasts suggest fuel demand in China showed a growth of only 180,000 to 300,000 barrels per day, down from earlier estimates of 700,000 barrels per day due to economic slowdowns in construction and manufacturing, and a shift towards alternative fuels like electric vehicles (EVs).