In a move that has sparked outcry and apprehension, Petroleum & Energy Authority officials have suspended operations of 40 gas stations in Addis Abeba and the surrounding Sheger cities. The decision, blaming the station operators’ failure to comply with a state-mandated digital payment system, has thrust the fuel retail market and its regulatory practices into the spotlight.

The suspension, which affects shipments from Djibouti, threatens to precipitate a significant petroleum shortage across the city and peripheral towns. The directive, issued by Saharla Abdullahi, director general of the Authority, comes after an audit that found over half of the transactions at these outlets were processed outside of Telebirr, a mobile money service operated by state-owned Ethio telecom. The crackdown, including warnings to 57 other stations, marks a rigorous enforcement of the digital payment system launched in April. It followed a month-long audit of 225 gas stations, using transaction data from Telebirr.

However, the suspension has been met with outrage from gas station owners, who argue that the Authority failed to conduct a proper auditing. Prominent brands such as National Oil Ethiopia (NOC), OLA Energies, and TotalEnergies are among those affected, raising concerns about the broader impact on the fuel retail industry.

The fuel retail sector has witnessed significant growth in recent years, with the number of operating companies increasing from nine to 49 and the number of fuel stations rising from 682 to 1,590. National Oil Ethiopia (NOC) holds the largest market share at 35pc, followed by multinational companies such as OiLibya and Total Ethiopia, with respective shares of 22pc and 23pc. Other companies, like Yetebaberut Beherawi Petroleum, TAF Oil, Kobil Ethiopia, and Dalol Oil, collectively hold around 11pc of the market.

Yet, despite its growth, the market trails neighbouring countries like Kenya in the number of fuel stations, a disparity partly attributed to smaller profit margins.

The Ethiopian Petroleum Supply Enterprise (EPSE) disclosed that over four billion dollars is required to procure gas for a year, covering 4.3 million tonnes of various types of gas. Procurement of these petroleum products is conducted through the federal government, such as the import of 60pc of white diesel and 100pc of aircraft petroleum from Kuwait. International tenders are often issued to buy benzene following disruptions in the previous supply from Sudan.

In the fiscal year 2020/21, the cost of Ethiopia’s petroleum imports saw a significant increase of nearly 19pc compared to the previous year, reaching an all-time high of 72.60 billion Br. This increase in cost is attributed to the higher international oil prices despite a 3.8pc decline in the total volume of imported petroleum. This decrease in volume was mainly due to a drop in the import volume of jet fuel and gas oil, offset by an increase in the import of regular gasoline and fuel oil.

The country has faced challenges, including increased costs due to higher international oil prices and logistical issues affecting the distribution sector. Smuggling to neighbouring countries from towns bordering them has been a major headache to the authorities who were pushed to make digital payment at gas stations mandatory.

The suspension has exposed a critical gap in implementing a uniform digital transaction system within a diverse financial landscape.

Ephrem Tesfaye, a board member of the Ethiopian Petroleum Dealer’s Association and a NOC gas station retailer, raised concerns about discrepancies in the data used by the Authority and the data held by the dealers. The discrepancy, he argued, could lead to critical shortages at his and other outlets.

“There is a data error,” he told Fortune.

He claimed that there is close to a 45 million Br difference between the data at the hands of the Authority and his dealership, with the suspension causing the 400,000ltr a week his outlet needs to be out of reach.