In Summary

Transporters also need spare parts, tyres and other items whose costs are calculated on the basis of the value of the Tanzanian Shilling against the United States Dollar.

If the consumer price index (CPI) is anything to go by, a reduction in petroleum prices should trigger a drop in transport costs. An analysis of the CPI--a basket of consumer goods and services that households purchase--suggests that there is cause for reduction in the prices of products and services that are closely linked with petroleum products, like electricity bills.

This is so because the cost of petrol--which is a huge chunk of transport expenses--has dropped to Sh499 per litre between September 2014 and February 2015. The cost of a litre of diesel and kerosene has come down by an average of Sh384 during the same period.

With a 9.5 per cent weighting in the CPI, one would expect the falling cost of petroleum products to be reflected in transport costs. Reduced transport costs would send good news to consumers of food and non-alcoholic products. These two categories account for a 47.8 per cent weighting in Tanzania’s CPI. The fact that food and non-alcoholic products must be transported to the market means that a reduction in transport costs will have far-reaching benefits for consumers.

Transporters also need spare parts, tyres and other items whose costs are calculated on the basis of the value of the Tanzanian Shilling against the United States Dollar. While we understand that the Tanzanian Shilling has been losing ground against the vehicle currency in the past few months, it is also worth noting that the cost of petroleum products has dipped at a wider margin than the Shilling has. With a Sh499 per litre change in prices of petrol, we can assume that transporters will fight for adjustments in transport costs if the prices are to be adjusted upwards. Should they also adjust their prices downwards to reflect declining petroleum prices, we will surely regard them as responsible entrepreneurs.