Fuel Price Surge Puts Households Pinched, Businesses Brace for Impact

Mar 2 , 2025
By Yemanebrhan Kiros

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The recent adjustment in fuel prices has stirred considerable anxiety among consumers, who are already struggling with rising costs. Officials have defended their decision, putting the blame on the international fuel market, the operational expenses of power plants, and the maintenance fees for distribution. They argue that the price changes were inevitable, given Ethiopia’s ongoing attempt to meet global trends and the need to keep vital infrastructure from crumbling under financial strain.

However, the concerns are real. Households feel the immediate squeeze on their budgets, and businesses worry that continued hikes could undercut their profit margins and dampen consumer demand.

Some fear that the rise in fuel costs could be only the beginning. The higher prices are tied to factors that go beyond supply and demand. The authorities have floated the exchange rate regime in line with recent economic reforms, and the Birr’s depreciation against the Dollar and other major currencies has become more pronounced. Because foreign exchange reserves remain limited and most fuel is imported, a weak currency inevitably translates into expensive imports.

In an economy under inflationary pressure and other economic strains, the spillover from costlier fuel threatens to escalate pressure on production, logistics, and household spending. Businesses foresee tighter margins, and many fear their competitive position could suffer.

Policymakers and industry leaders have begun to discuss energy consumption in broader terms. With prices climbing, there is a pressing need to rethink how energy is used in commercial and residential sectors. Experts insist that policymakers should keep a baseline showing exactly how much energy is consumed that ends up powering machinery, facilitating production, or running essential services. Without such data, it becomes difficult to gauge efficiency levels or calculate the tangible impact of energy-saving measures, creating a knowledge gap that undermines effective planning.

This lack of an established baseline contrasts with studies and reports repeatedly emphasising the importance of optimising energy use. Many industries worldwide, including those in emerging markets, have adopted clear strategies to enhance energy efficiency. They regularly check for potential system losses and plug gaps that drain resources. Such measures are typically deemed cost-effective. They often do not demand substantial capital investments, especially in the initial stages, and can yield considerable savings.

Increasing efficiency can help protect manufacturing operations, service providers, and consumers against sudden price swings destabilising their budgets and operations.

Universal awareness of energy efficiency is lacking across various sectors. While the need for more efficient consumption is regularly mentioned in policy discussions, it has yet to be woven into daily life. Officials have discussed rolling out awareness campaigns, but coordinating them nationally remains challenging. Reaching households that still rely on firewood for cooking, as well as businesses that depend on diesel generators or the national grid, requires different messaging and strategies.

Large segments of the population consume energy in some form, and they would benefit from knowing how small changes in their consumption habits could lead to considerable savings.

Proponents of a stronger push for efficiency often argue that such moves could help address rising prices in the short term. An immediate reduction in waste and unnecessary consumption could serve as a financial buffer while implementing longer-term solutions. Utility companies, for their part, could benefit from less strain on the grid, ultimately extending the lifespan of their infrastructure. Fewer breakdowns and less frequent repair work would reduce maintenance costs, potentially easing some of the financial pressures that consumers and providers alike have to shoulder.

In policy circles, some officials describe energy efficiency gains as a “virtual dam.” The phrase implies that the cheapest and cleanest energy is the kind that never needs to be generated. By eliminating waste, countries can create what amounts to extra capacity within existing power-generation and distribution systems. In countries where power interruptions are common, reducing consumption in certain areas could help lessen blackouts or voltage drops in others.

Even so, Ethiopia’s struggles with power cuts are not expected to disappear any time soon, as building a reliable grid requires capital, logistical capacity, and political commitment. However, energy efficiency is seen by many experts as one of the most affordable, fastest ways to soften the impact of frequent outages and make the most of whatever electricity is available. Although several initiatives have targeted a better energy management over the years, the scale of these programs is believed to fall short of the country’s pressing needs.

A consistent nationwide drive would need every stakeholder — from government agencies to utility companies and from industrial players, development partners to the public — to do their part in adopting and advocating more efficient systems.

The question is often where to begin. Some analysts say the biggest hurdle is the knowledge gap. Without addressing it head-on, any campaign to reduce consumption or enhance efficiency will likely lose momentum once initial enthusiasm fades. Ensuring that improvements are systematic and continuous requires strategy, measurement tools, and benchmarks. Learning from past activities that yielded positive results could help shape current plans, while success stories from local industries might inspire new adopters to follow suit.

One promising approach is adopting recognised standards that have proven effective in other parts of the world. An internationally established energy management standard, ISO 50001, is frequently mentioned in discussions about improving efficiency. Though not widely implemented locally, it has delivered measurable gains for many industries abroad. The standard emphasises understanding an organisation’s energy usage, setting clear reduction goals, and monitoring progress over time. Its compatibility with other management frameworks can facilitate smooth adoption for companies familiar with similar procedures.

Companies adopting ISO 50001 could see immediate financial and operational benefits. According to various studies, factories and other businesses might save up to 10pc of their total energy use by implementing better housekeeping practices around energy consumption. Replacing outdated or inefficient equipment, as well as incorporating renewable energy sources such as solar power, could push potential savings above 20pc. As fuel costs rise and the currency weakens, these figures become increasingly important, since any opportunity to cut expenses can translate into a competitive edge in domestic and international markets.

Supporters note that better data collection is a direct byproduct of the standard, and that data could prove invaluable to utilities seeking to upgrade infrastructure, reduce outages, or detect theft. Some believe theft will rise with the energy cost, making it urgent to track consumption patterns. Insights from usage data might help authorities identify suspicious activities, secure vulnerable spots in the distribution system, and curb revenue losses. The net effect of robust monitoring could be fewer disruptions and improved reliability, both essential to economic growth.

Alongside interruptions, power quality problems have also taken a toll on households and industrial facilities. Frequent voltage fluctuations or irregular service can cause sensitive equipment to fail, leading to repair or replacement costs that deplete foreign currency reserves and devalue local wealth. In businesses, production lines can grind to a halt when machines shut down unexpectedly, prompting costly downtime and the potential loss of contracts. By focusing on better usage data and systematic improvements, officials and companies hope to deal with the volume of energy available and its quality.

Some analysts also point to broader economic benefits that could come from an upgraded approach to energy. In addition to stabilising the domestic market, companies that export goods might find a bigger audience among international buyers seeking products made with minimal environmental impact. Climate-related considerations are increasingly part of global trade discussions, and businesses that demonstrate rigorous energy management can capture valuable market share.

In the domestic textile industry, for example, some manufacturers are already feeling the pressure to provide data on their emissions. International clients often demand precise figures as part of procurement checks, sometimes before they even sign purchase orders. By adopting more advanced energy management systems, domestic factories could differentiate themselves in a crowded global market, especially if they keep costs low and maintain standards that align with environmental guidelines abroad.

The ongoing surge in energy prices makes all these efficiency measures more urgent. Numerous companies find that systematically tracking how they consume resources saves them money and positions them better in future negotiations with foreign buyers and investors. A culture of efficiency stimulates innovation, and a commitment to international standards signals that organisations value transparency and accountability.

The results can be seen in reduced emissions, smaller energy bills, and a business model that is more resilient to the next market shock.

Ethiopia’s fuel price hike may be a painful reality check for citizens, but it should also serve as a catalyst to reevaluate how energy is consumed, conserved, and managed. If policymakers, industry leaders, and the general public seize this moment to close the knowledge gap and commit to continuous improvements, they may well discover that the best source of new energy is the kind they never needed to generate in the first place.

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PUBLISHED ON Mar 02, 2025 [ VOL 25 , NO 1296]

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