Fuel prices: Why developing economies are paying the most at pump

What the report says

Developing economies are being hit hardest by a global fuel price shock linked to disruptions to shipping through the Strait of Hormuz, according to a new UN Conference on Trade and Development (UNCTAD) report cited by The Observer. The report says higher petroleum costs are feeding inflation, reducing household purchasing power and increasing pressure on government budgets, especially in countries that rely heavily on imported fuel and have less room to absorb external shocks.

The Observer reports that UNCTAD found large jumps in international energy prices, with diesel, gasoline, shipping fuel and jet fuel all rising sharply over the period examined. The burden is uneven: low-income countries face a much larger increase in the cost of buying diesel relative to monthly income than richer economies. The report also points to domestic fuel price rises across several developing countries, including Tanzania, Ethiopia, Malawi, Myanmar and Rwanda.

The article says the shock is not limited to countries directly affected by the Middle East conflict. Instead, it is spreading through global supply chains, raising transport, production and import costs. Because fuel is a key input for farming, manufacturing, electricity generation and logistics, higher prices can quickly lift the cost of food, goods and services.

The Observer also uses Uganda as an example of the wider trend, noting that fuel prices there have climbed while the shilling has weakened and inflation has risen. More broadly, the report argues that developing countries may need stronger energy resilience, including better electricity infrastructure, alternative energy and more efficient transport systems.