Fuel prices in Zimbabwe have in the past few weeks gone up by at least 5 cents to $1,32 and $1,16 per litre for petrol and diesel respectively.
The increase has been attributed to changes in free on board (FOB) price — the price at which fuel is charged by local traders as determined by international market forces at the port of delivery.
The move has raised fears of general commodity price rises in an economy already weighed down by a crippling liquidity crunch.
Fuel dealers have raised prices as the international price of crude oil per barrel rose to $44,57 as of Thursday.
The price of crude oil had fallen during the early months of 2016, dropping in February to an average of between $33 and $38 per barrel, leading to a downward review of fuel prices, in Zimbabwe.
In February, the local price of fuel stood at $1,35 and $1,25 for petrol and diesel respectively. The price was further reduced to $1,27 and $1,02 for petrol and diesel respectively.
In an interview last week, Zimbabwe Energy Regulatory Authority (Zera) CEO Gloria Magombo said fuel prices had gone up again due to corresponding rises on the international market, driven by the FOB price.
“We subscribe to a unit we call Platt, a market priced data base used to monitor fuel prices, especially the FOB prices. Fuel supply contracts are linked to Platts,” Magombo said.
S&P Global Platts is a leading independent provider of information and benchmarks prices for commodities on the energy markets for use, especially by regulatory bodies.
Under this platform, FOB prices can be followed easily and Zera is then able to capture market data each week to calculate the FOB price.
“When the FOB price starts going up, according to our taxing system, fuel prices will also go up. Currency differences regionally are the reason why we [Zimbabwe] are priced higher than the rest of the region. As long as we are a United States dollar economy, we cannot compete against regional fuel prices,” Magombo said.
She said the main reason for the recent surge in fuel prices was the increase in international prices since March.
A survey conducted by Standardbusiness on fuel dealers revealed that Total was charging $1,32 and $1,18, Engen ($1,30 and $1,14), Puma ($1,32 and $1,16), Redan Petroleum ($1,33 and $1,17), Zuva ($1,32 and $1,17) and Trek ($1,31 and $1,14) for petrol and diesel respectively.
Malawi fuel prices ranged at $1,09 and $1,06, Lesotho ($0,70 and $0,67) and Swaziland ($0,75 and $0,74) for petrol and diesel respectively. The reason for the lower prices in these countries was that they used weaker currencies than the US$ and the effect was that they appeared like they were subsidising the price, Magombo said.
Meanwhile, in South Africa fuel prices range at an average of $0,91 and $0,92, Namibia ($0,68 and $0,64), Angola ($0,95 and $0,80), Botswana ($0,69 and $0,65), Mozambique ($0,74 and $0,57) and Zambia ($1,02 and $0,89) for petrol and diesel respectively.
The low prices in these markets are influenced by the fact that some of these countries are close to the ports, while some have their fuel semi-subsidised.
Others like South Africa have refineries and therefore import crude oil at cheaper prices.
In Zimbabwe, fuel prices are determined by Statutory Instruments (SI) 80 of 2014, 20 of 2015 and 100 of 2015. Under these statutory instruments, the pricing structure for fuel is made out of a plethora of factors which then lead to a substantial rise in the price of the product.
These include FOB, freight, duty, Zinara road levy, carbon tax, debt redemption, strategic reserve levy and storage.
Other factors are handling, clearing agency fees, financing cost, inland bridging cost, storage and handling costs, and secondary transport costs. standard