VZCZCXRO6319
RR RUEHMA RUEHPA
DE RUEHOU #0733 2210959
ZNR UUUUU ZZH
R 080959Z AUG 08
FM AMEMBASSY OUAGADOUGOU
TO RUEHC/SECSTATE WASHDC 4045
INFO RUEHZK/ECOWAS COLLECTIVE

UNCLAS OUAGADOUGOU 000733 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EIND ELTN ENRG EPET PGOV UV
SUBJECT: BURKINA FASO: GOVERNMENT ANNOUNCES FUEL PRICE INCREASE 
 
¶1. (U) Summary:  On July 11, the Ministry of Commerce and SONABHY, 
the national oil company, announced increases in the retail price of 
gas by an average of nine percent.  Local labor unions denounced the 
price hikes as "unbearable."  Average consumers complained to 
reporters on the street, but seemed to take the changes in the 
stride of "la vie chere" (the high cost of living).  However, the 
long-term consequences of the rate increase could further exacerbate 
the high cost of transportation and basic goods in landlocked 
Burkina Faso.  End Summary. 
 
¶2.  During a July 11 press conference, Secretary-General of the 
Ministry of Commerce Jean-Claude Bicaba and Director of SONABHY Jean 
Hubert Yameogo announced the first price increase in the retail cost 
of gas since the Government of Burkina Faso (GOBF) froze gas prices 
last July.  Burkina Faso is now among several other Governments in 
West Africa to raise gas prices in recent months, including Cote 
d'Ivoire, Togo, and Senegal.  Under the new rates, unleaded gas is 
up 7.46 percent to USD 6.62 a gallon; diesel is up 15.26 percent to 
USD 6.39 a gallon; lamp oil is up 6.5 percent to USD 4.50 a gallon; 
lubricated gasoline is up 7.52 percent to USD 6.58 a gallon.  These 
prices are marginally lower in Bobo-Dioulasso, the second largest 
city in Burkina Faso. 
 
¶3.  Six of the central labor union leaders and one autonomous union 
leader signed a letter on July 11 declaring that these increases in 
fuel costs would lead to an increase in prices of other goods and 
services and make an already difficult situation "unbearable for a 
large swath of the population."  Burkinabe interviewed by the local 
press echoed these concerns by calling the price increase a 
deplorable action, demanding subsidies on basic goods to offset the 
price increase, and accusing the government of providing salary 
increases to government employees instead of fully subsidizing gas 
prices.  Despite the public's fears that the increase of fuel prices 
would raise their transportation costs within the city of 
Ouagadougou, during a July 26 meeting, the local branch of National 
Federation of taxi drivers and transportation workers decided to 
maintain their current fares, at least for the time being. 
 
¶4.  According to SONABHY, despite the increase in fuel prices, the 
GOBF continues to subsidize fuel and consumers are still not paying 
the full cost.  World oil prices have steadily increased in the past 
year, from USD 92 a barrel in January 2008 to USD 147 a barrel on 
July 11, 2008.  Because SONBAHY was unable to raise consumer prices 
for one year, it lost almost USD 56 million.  However, despite the 
price freeze, Yameogo claimed his firm made a net profit during 
calendar year 2007, but would not make the same kind of profit in 
¶2008.  SONABHY's spokesman assured the press that SONABHY was in no 
danger of going bankrupt - a point that Minister of Economy and 
Finance Jean-Baptiste Compaore emphasized to Charge d'Affaires David 
Brown in a meeting on July 11. 
 
¶5.  When asked by the press if privatization of SONABHY could 
relieve the cost burden on the consumer, Bicaba challenged the 
belief that privatization or the liberalization of the fuel market 
would result in lower market prices.  SONABHY representatives agreed 
that privatization was not the answer and highlighted statistics to 
support their position.  (NOTE: According to SONABHY, a 12kg gas 
cylinder in Mali costs USD 29.20, while in Burkina Faso it only 
costs about USD 9.73.  However, Post has been unable to confirm 
these numbers, and the Malian Ministry of Commerce quotes 2007-2008 
national prices as being about 10 cents lower per liter than prices 
in Burkina Faso - disproving SONABHY argument.  END NOTE.) 
 
¶6.  Comment:  Because the Ministry of Commerce fixes truck and rail 
transportation prices at rates that permit transporters to make a 
set margin of profit, it is expected that the price for shipping 
will increase as a direct result of the increase in gas prices. 
This will most likely lead to higher prices for food and consumer 
goods in urban and rural areas, thus exacerbating "la vie chere," or 
the already high cost of living, which sparked riots in Burkina in 
February 2008. 
 
LOCKARD