Somaliland’s Fuel Crisis: What the Government Must Do Next

Hargeisa, Somaliland — A new directive from the Ministry of Trade and Tourism of the Republic of Somaliland, aimed at controlling domestic fuel prices, is facing a spectacular failure after going entirely unenforced at gas stations across the country.

Although the ministry officially set the retail price of petrol at 9,701 Somaliland Shillings ($0.89 USD) per liter, the reality on the market is starkly different. In recent hours, fuel prices have skyrocketed, now nearing 12,000 Somaliland Shillings per liter, with no sign that merchants are complying with the government's mandate.

This exposes the government’s inability to control a free market during an external shock that is severely weakening global supply chains—specifically, the fierce war unfolding in the Middle East and the closure of the Strait of Hormuz, the world’s most critical oil chokepoint.

Before the war erupted, the average price of a liter of petrol in Somaliland was 8,400 SLSH ($0.81 USD). The current rapid price surge appears to be heading toward an all-time high, placing an immense burden on the cost of living for citizens, the transport sector, and national industries.

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The Interior Minister’s Order and Police Pressure

In an attempt to counter the merchants' defiance, Somaliland’s Minister of Interior, Hon. Abdale Mohamed Arab, issued an urgent directive (Ref: 18/03/2026) ordering the Police Commander and all Regional Governors to take strict legal action against anyone violating the mandated fuel prices.

Minister Abdale’s statement strictly prohibited merchants from hoarding fuel to create artificial scarcity and artificially inflate prices (monopolization/price gouging). The Ministry of Trade also determined that diesel intended for power plants and water agencies must be sold at $140 per barrel, while transport fuel that was already in the country before the Middle East war began was capped at $165 per barrel.

"The Police Commander and Regional Governors of the country are instructed to work with the Ministry of Trade to enforce this directive... anyone who attempts to break this directive must face legal action," the Interior Minister’s letter read.

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Why Did This Order Fail?

While the government appears to be responding to public outcry and attempting to prevent merchants from exploiting the situation, police pressure and official decrees alone cannot resolve the challenges generated by a free market economy.

The real problem undermining this directive is a fundamental clash in economic perspective. The government's decree specifically targets the fuel inventory that was already in the country before the war broke out, which merchants purchased abroad when prices were lower. The government's objective is to prevent businesses from unfairly price-gouging the public on cheaply acquired reserves by exploiting wartime panic.

However, fuel importers are looking at the reality of global markets and are guided by what is known as "Replacement Cost." Even though the fuel currently in their storage tanks is relatively cheap, they believe that if they sell it at the government's low mandated price, the resulting revenue and profit margins will not be enough to purchase the next shipment from abroad, given that the closure of the Strait of Hormuz has sent global barrel prices into the stratosphere. Simultaneously, many opportunist merchants have viewed this crisis as a chance to make excessive profits, intentionally hoarding existing fuel supplies.

This collision between the government’s decision to control domestic reserves and the natural behavior of free-market merchants is rapidly generating two highly dangerous consequences:

• Black Market: Merchants are hiding their fuel to avoid being forced to sell at the government rate. This fuel is then sold clandestinely to the public at exorbitant prices, completely outside government control.

• Artificial Shortages: Merchants are entirely halting the sale of fuel until the situation clarifies or a more acceptable price is reached. This hoarding is creating an immediate energy shortage in the country, paralyzing transportation networks and national power grids.

Ultimately, even if the government uses police force to compel the sale of current reserves

at the mandated price, it will face a bitter reality once those reserves are depleted. If the Middle East war continues and the Strait of Hormuz remains closed for an extended period, fuel prices will skyrocket regardless of how strictly the Somaliland government enforces its decrees, simply because it has no power over the volatility and supply dynamics of global markets.

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Strategic Steps Somaliland Must Take

Instead of wasting time deploying police and issuing directives that are incompatible with a free market, what options does the Somaliland government have to rescue the nation from a crisis that has already taken its toll?

The real solution is not punishment, but flexible economic policy and proactive crisis management. Here are the short- to medium-term strategic steps the government must take immediately:

1. A Temporary Reduction or Suspension of Fuel Taxes (Tax Holiday): The very first step the government can take is to demonstrate responsibility by waiving a portion of the taxes it collects on fuel arriving at the Port of Berbera. A temporary suspension (tax holiday) or a percentage reduction in taxes for a set period (e.g., the next three months) is the only official mechanism the government possesses to genuinely lower retail prices without inflicting losses on merchants. This relief would go directly into the pockets of the public.

2. Inventory Management and Control of Existing Reserves: Before the Strait of Hormuz closed, there was existing fuel storage in the country. To prevent the hoarding of these reserves, the government must closely monitor the storage tanks in the city of Berbera. Instead of sending police to retail gas stations, the government must ascertain exactly how much fuel is in the country, how much is being exported (to neighboring Ethiopia), and how much is entering the domestic market. If the country faces a severe shortage, the export of fuel to neighboring countries must be temporarily suspended to safeguard domestic needs.

3. Targeted Subsidies for Essential Sectors: If the situation spirals out of control and the

government cannot afford to subsidize all fuel in the country, it must establish a targeted subsidy plan exclusively for the most critical sectors of life to prevent hyperinflation from hitting food prices. The government must provide special discounts or subsidized fuel to:

• Power Companies and Water Agencies: To prevent utility bills from becoming unaffordable for the public.

• Food and Livestock Transport: To control the freight costs imposed on basic food commodities.

4. Open Dialogue with the Country's "Fuel Powers": The government must pivot away from issuing rigid orders and move toward the negotiating table. Somaliland's markets are controlled by a few major corporations. The President or the Minister of Finance should hold closed-door meetings with the heads of these major companies. The objective is to establish a mutual understanding of the crisis, obtain accurate data on their import costs, and agree on burden-sharing to prevent these companies from halting fuel imports altogether, which would plunge the country into darkness.

5. Facilitating and Incentivizing Alternative Supply Chains: Since the Strait of Hormuz is the primary chokepoint right now, the government and the private sector must work together to import fuel from alternative sources that do not pass through the Red Sea or the Persian Gulf (for example, partnering with companies that can source fuel from other global markets, even if it is more expensive). If the government expedites port requirements and the unloading of urgent shipments, it could accelerate the arrival of new fuel before the old reserves run dry.

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The war in Iran and the closure of the Strait of Hormuz is a global circumstance entirely out of Somaliland's hands. Managing the resulting economic fallout cannot be achieved by deploying armed force at gas stations; it requires crisis management economic policies, compromise between the government and the business sector, and a willingness from the government to demonstrate to the public that it, too, is ready to lose revenue (via tax cuts) to save the economy of its most vulnerable citizens.