The government has started the process of procuring 40,000tn of benzene in response to the potential shortages that could be caused by the disruptions of the Novel Coronavirus (COVID-19) pandemic.

The Ethiopian Petroleum Supply Enterprise signed a deal two weeks ago for the supply of the oil from the Abu Dhabi National Oil Company (ADNOC), a state-owned oil company of the United Arab Emirates. The Enterprise is negotiating with the company to ensure the delivery of the benzene by the end of May.

Although the order was made two weeks ago, the cost of fuel is going to be determined at the spot price when the fuel is procured, according to Tadesse Hailemariam, CEO of the Enterprise.

The estimated spot price for cargoes of 95 RON, a premium gasoline standard, for loading in Fujairah, UAE was 20.68 dollars a barrel on Thursday, April 30, 2020, according to S&P Global Platts, a provider of commodity data. Based on this price, Ethiopia would be paying approximately seven million dollars before shipping costs.

Global oil prices are currently at 20-year lows, pressured by both a substantial fall in demand due to COVID-19 and a supply glut caused by a disagreement between Russia and Saudi Arabia, two of the top three producers in the world.

There are certain conditions in which if there is a five percent drop in the Brent or Platts index on the global market, then there will be a contract revision, according to Serkalem Geberkirstos (PhD), the former CEO of Dalol Oil currently working as a consultant.

"For Ethiopia, we usually use Middle Eastern producers such as Kuwait or Saudi Arabia to estimate the price," he added. "Since there is a significant drop in the global market, the government should consider bargaining for lower prices of oil."

“There is no special procurement for this," Tadesse said. "It’s made as an additional purchase within the existing lines of supply to the country."

The decision to procure the fuel was passed through the ministries of Finance and Trade & Industry after agreeing that it would provide security for the public in the event of a worst-case scenario.

The board of the Ethiopian Petroleum Enterprise, the committee of the National Bank of Ethiopia, and the ministries, have passed directives to increase the stock of essential commodities, including petroleum, according to Eshete Asfaw, state minister for Trade & Industry.