Developing economies are bearing a disproportionate burden of the global fuel price shock triggered by disruptions to shipping through the Strait of Hormuz.According to a new report by the United Nations Conference on Trade and Development (UNCTAD), the rising petroleum costs have intensified inflation, straining household incomes and increasing pressure on public finances.The report, Strait of Hormuz Disruptions: Soaring Fuel Prices and the Burden of Inflation, shows that surging international energy prices have led to significantly higher domestic fuel costs, particularly in low-income countries where households and businesses have limited capacity to absorb external economic shocks.According to UNCTAD, global diesel prices rose 81 per cent between February 28 and October 20, 2026, compared with the six months before the conflict. Gasoline prices rose by 64 per cent, while shipping fuel increased by 72 per cent. Jet fuel prices also surged by 80 per cent globally, with Africa recording an increase of 89 per cent, highlighting the uneven impact of the energy crisis across regions.The report attributes the increases to persistent disruptions in the Strait of Hormuz, constrained refining capacity, rising shipping costs and barriers to international trade. Reduced vessel availability, longer shipping routes and time-consuming transfers in the Middle East have further increased the cost of transporting petroleum products.The resulting price increases are placing a disproportionate financial burden on developing countries, where fuel expenditure represents a larger share of household incomes and economic activity.UNCTAD’s analysis of the additional cost of purchasing 40 litres of diesel, measured against monthly gross domestic product per capita, illustrates the disparity. The increase amounted to 10.9 per cent in low-income countries, compared with 3.3 per cent in lower-middle-income countries, 1.3 per cent in upper-middle-income countries and just 0.4 per cent in high-income economies.The figures demonstrate how the same international energy shock can have vastly different consequences depending on a country’s income level and capacity to absorb higher import costs.The report identifies substantial increases in domestic fuel prices across several developing economies since the beginning of the Middle East conflict. Among the least developed countries examined, diesel prices increased by 42 per cent in Tanzania, 47 per cent in Ethiopia, 67 per cent in Malawi and 77 per cent in Myanmar.Rwanda recorded a 39 per cent increase in diesel prices and a 42 per cent increase in gasoline prices. More broadly, retail gasoline prices increased by more than 20 per cent in 60 countries, while diesel prices rose by more than 20 per cent in 95 countries.UNCTAD’s findings indicate that disruptions to international energy markets are not confined to countries directly affected by the conflict. Instead, the effects are being transmitted through global supply chains, exposing fuel-importing economies to rising transportation, production and import costs.For developing countries, the consequences extend beyond the cost of filling vehicle tanks. Fuel is a critical input in transportation, manufacturing, agriculture and electricity generation. Higher petroleum prices therefore increase the cost of moving goods, operating machinery, producing food and running businesses.Diesel price increases are particularly consequential because the fuel powers commercial trucks, buses, agricultural equipment, generators and industrial machinery.As transportation and production costs rise, businesses may pass the additional expenses on to consumers through higher prices for food, manufactured goods and services. The report also highlights the interaction between rising fuel prices and foreign exchange pressures.Developing countries that depend heavily on imported petroleum products require more foreign currency to meet their energy needs when international prices increase. Where domestic currencies are weakening, the cost of importing fuel rises further, compounding the inflationary impact.This combination of higher international prices and currency depreciation can intensify inflation while worsening foreign exchange shortages.UNCTAD warns that the energy shock is exacerbating inflationary pressures and increasing the financial strain on governments in developing economies. Higher fuel prices can weaken household purchasing power, particularly among low-income families that spend a larger proportion of their earnings on essential goods and services.At the same time, governments seeking to protect consumers from rising fuel costs through subsidies or other interventions risk placing additional pressure on already constrained public finances. The report further notes that monetary policy responses to inflation can increase borrowing costs, potentially slowing economic growth while adding to fiscal pressures.These challenges are particularly significant for countries with limited fiscal space, high import dependence and weaker economic resilience. The energy crisis is therefore emerging as a broader development challenge, with implications for economic growth, public finances, household welfare and the stability of domestic markets.Uganda’s experience provides an example of how the international fuel price shock is being transmitted into domestic economic pressures.Diesel prices have surged beyond Shs 7,000 per litre at several filling stations, while petrol is selling at about Shs 6,900. The increases have coincided with a sharp depreciation of the Ugandan shilling, which has weakened from around Shs 3,600 to Shs 4,500 against the US dollar in recent weeks.The combination of rising international petroleum prices and a weaker shilling has increased the cost of importing fuel, placing additional pressure on businesses and consumers.In October, parliament raised concerns over the weakening currency and escalating fuel prices, warning that the developments were increasing the cost of doing business and worsening the cost-of-living pressures faced by ordinary Ugandans. The Leader of the Opposition (LoP), Joel Ssenyonyi, observed that petrol and diesel price fluctuations had become problematic for consumers.Uganda’s annual inflation also rose to 5.8 per cent in October, from 4.6 per cent in September, its highest level since June 2023. Food inflation increased sharply to 10.7 per cent from 4.5 per cent, amid higher oil prices and currency depreciation.Higher fuel costs increase the expenses incurred by businesses moving merchandise between Kampala, regional towns and rural markets. They also raise the cost of transporting agricultural produce from farms to urban centres, potentially contributing to higher food prices.Manufacturers, including those operating in industrial areas such as Namanve, face additional production costs where generators and machinery depend on diesel. For households, the consequences extend to transport fares, food expenditure and the prices of essential goods and services.Uganda’s experience underscores the vulnerability of fuel-importing economies to external shocks, particularly when international price increases coincide with currency depreciation and rising domestic inflation.UNCTAD argues that the fuel price shock highlights the need for developing countries to strengthen their resilience to disruptions in international energy markets. The report observes that fuel price volatility is not merely an energy market problem but a development challenge with far-reaching implications for inflation, economic growth, public finances and household welfare.It also highlights the importance of investing in energy transition and electricity infrastructure as part of efforts to improve development outcomes, resilience and energy security.It indicates that investments in reliable electricity, alternative energy sources and efficient public transport could help reduce dependence on imported petroleum products and limit exposure to future oil price shocks.Strengthening agricultural production and local manufacturing could also reduce dependence on imported goods whose prices are influenced by international energy costs.The post Fuel prices: Why developing economies are paying the most at pump appeared first on The Observer Media Ltd.