Ethiopia's federal government has introduced fuel conservation measures as the ongoing Iran conflict disrupts oil transit through the Strait of Hormuz, pushing global crude prices above $100 per barrel.
The measures come as Ethiopia imports over $4 billion in fuel annually, making the country vulnerable to supply chain disruptions and price volatility in the global oil market. The Strait of Hormuz, through which approximately 20% of global oil passes, has seen reduced tanker traffic due to the Iran war.
Global oil prices have surged past the $100 per barrel threshold for the first time since 2022, driven by supply concerns from the Middle East conflict. The price increase directly impacts Ethiopia's import bill, as the country relies entirely on refined petroleum products from international markets.
The conservation measures represent the government's attempt to manage fuel demand amid supply uncertainty and rising costs. Ethiopia's fuel import dependency has grown alongside its economic expansion, with petroleum products accounting for a significant portion of the country's import expenditure.
Advertisement
The National Bank of Ethiopia (NBE) has been managing foreign exchange allocation for fuel imports as part of the country's broader currency reform program. Rising oil prices compound pressure on Ethiopia's foreign currency reserves, which the central bank has been carefully managing since the birr's liberalization in July 2024.
Ethiopia's manufacturing sector, which has grown rapidly in recent years, relies heavily on fuel for transportation and energy generation. Higher oil prices could impact production costs across industries, from textiles to agriculture processing, potentially affecting the country's export competitiveness.
The fuel conservation announcement comes as Ethiopia continues implementing its IMF-backed macroeconomic reform program, which includes managing external shocks while maintaining economic growth. The World Bank has projected Ethiopia's GDP growth at 6.2% for the current fiscal year, though external factors like oil price volatility pose risks to this outlook. Ethiopia's experience mirrors that of other oil-importing African economies facing similar pressures from Middle East supply disruptions.
