Heavy government subsidies have kept fuel prices low in Ethiopia to offset the population's low income and limited purchasing power. But the Ethiopian government's new economic policies aim to gradually phase out these subsidies, shifting toward a more market-driven pricing system.
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As of January 10, 2025, Ethiopian citizens woke up to yet another price hike in fuel. This time, it’s not just regular—gasoline—but also kerosene, jet fuel, light diesel, white diesel, and heavy black fuel. The increase comes at a time when the global oil market resembles a yo-yo, thanks to geopolitics, economic turbulence, and the world’s unpredictable swing with alternative energy sources. But before getting into the why, here are the local fuel prices that will have everyone look at their wallets with teary eyes:
Gasoline: 101.47 ETB
White Diesel: 98.98 ETB
Kerosene:98.98 ETB
Jet Fuel: 109.56 ETB
Global Oil Drama
The Ethiopian government points to the volatility of global oil markets as the main reason. And they’re not wrong—global oil benchmarks like Brent Crude and WTI have been on a rollercoaster ride. Last September, Brent crude prices dropped to $71.78 per barrel, only to rebound to $81.08 in October. Why? A drop in demand from China, which has been the oil world’s heaviest consumer, combined with economic slowdowns in manufacturing and construction, played a significant role. Add the increasing adoption of electric vehicles, and suddenly, demand isn’t what it used to be.
The Local Burden
Meanwhile, back home, Ethiopia has been burning through its price stabilization fund faster than a gas-guzzling SUV on an open road. In just five months, this fund has ballooned from 58 billion birr to a jaw-dropping 133 billion birr. That’s a 75-billion-birr hole, with 30 billion birr coming from subsidization payments. According to Sahrela Abdullahi, director of the Petroleum and Energy Authority, failing to adjust oil prices in recent years has drained resources meant to cushion the economy.
The IMF approved $248 million for Ethiopia, urging the removal of fuel subsidies and easing lending caps cautiously as part of a $3.3 billion reform plan. They praised progress in stabilizing the currency market and addressing debt under the G20 framework but called for stricter banking oversight and faster expansion of social safety nets to protect the vulnerable. So far, Ethiopia has received $1.61 billion under the IMF’s 48-month program.
To make matters worse, the government has decided to offload most of the financial burden onto consumers. White diesel and kerosene users will absorb 20% of the increase, while customers relying on heavy black and light fuel get to enjoy the full price tag. Yay for fairness.
What Does This Mean for Ethiopia?
Fuel price hikes are never just about fuel. They ripple through every sector, increasing the cost of transportation, food, and everyday goods. For a country like Ethiopia, where many already struggle to make ends meet, this hike is a gut punch.
But what about the economy? The government claims these measures will reduce debt and stabilize the price stabilization fund. However, it’s a short-term solution to a long-term problem. Fuel subsidies are unsustainable, but so is asking citizens to foot the entire bill when wages remain stagnant, and inflation continues its merry ascent.
