THE Zimbabwe Energy Regulatory Authority (Zera) has blamed
skyrocketing fuel prices on the surge in crude oil prices in recent weeks.
Petrol prices have gone up from $1,33 to between $1,39 and
$1,40 a litre while that of diesel has shot up from $1,23 to $1,26 per litre in
the past two months.
Zera acting CEO Misheck Siyakatshana told Standardbusiness
that the surge in the fuel prices locally was a reflection of international
trends.
“The market witnessed a surge in fuel prices from an
average $1,33/litre for petrol in March 2018 to $1,40/litre in May 2018,” he
said.
“The upward trend is coming from the international market
as evidenced by the price of a barrel of crude oil, which was trading at
$65,32/barrel and now stands at $72,11/barrel.
“Prices for the week starting 7 May 2018 are diesel $1,26
and petrol $1,40,” he said.
“When government reduced duty on fuels (in January) they
said that did not mean that fuel prices would remain constant.
“They said the prices would continue to change up or down
depending on external factors to do with the movement of crude oil prices based
on developments in the oil-producing countries.
“We must note that oil prices are always changing daily and
as a country, Zimbabwe is a price taker.”
There was a significant rise in the price of crude oil
after United States President Donald Trump announced that his country was
pulling out of the Iranian nuclear deal recently.
Prior to that, the price of crude oil had been slowly
rising since January when it was still unclear what position the US was going
to take on the deal.
As of Friday, the price of brent crude oil per barrel was
$77.
Iran is a big player in the fuel industry globally and is
estimated to produce about 5% to 10% of the world’s crude oil and is the
second-largest exporter among members of the Organisation of Petroleum
Exporting Countries.
“The upward movement in the price of fuel is not unique to
Zimbabwe as other countries in the region have been affected as well,”
Siyakatshana said.
“Fuel prices have been increasing in Malawi, South Africa
and Zambia.”
However, in Zimbabwe, fuel price increases cannot be
attributed solely to world markets.
For example, the price per litre of petrol and diesel,
respectively, in South Africa is $1,20 and $1,08, Malawi ($1,14 and $1,13) and
Zambia ($1,38 and $1,20). That is way below the prevailing prices in Zimbabwe.
The reason is predominantly that these countries are able
to subsidise their consumers to cushion them against rising crude oil prices.
In Malawi, prices have not changed since July 2017 due to
the government using a price stabilisation fund that allows protection against
a rise in the country’s fuel cost build-up and its reliance on the strength of
its currency against the US dollar.
Back in January, the Zimbabwean government caved in to
pressure to reduce fuel prices after industry complained that prices were
pushing up their output costs, which would have ripple effects that would
affect prices of basic commodities.
Government then reduced excise duty by 6,5 cents per litre
to 38,5 cents from 45 cents for petrol while the excise duty on diesel and paraffin
declined to 33 cents per litre from 40 cents per litre.
As a result, the price of fuel went down to $1,35 and $1,23
from $1,39 and $1,25 per litre for petrol and diesel respectively.
The recent rise in fuel prices translates to an increment
of five and three cents for the price of petrol and diesel per litre,
respectively.
Zimbabwe has a plethora of costs in its fuel cost build-up.
These include free on board, freight, duty, Zimbabwe National Road
Administration road levy, carbon tax, debt redemption, strategic reserve levy
and storage.
Other factors are handling, clearing agency fees, financing
costs, inland bridging costs, storage and handling costs, and secondary
transport costs.
As a result, factoring in all these costs, the fuel cost
build-up charges are close to 60 cents of the pump price per litre for diesel
and petrol.
The current rise in fuel prices is set to affect prices of
other commodities.
Confederation of Zimbabwe Industries president Sifelani
Jabangwe said in tanden with the rise in international prices the price of fuel
in Zimbabwe remained high and would affect producers though marginally.
“For those who have high usage of fuel in their businesses
there could be some effects because we understand the prices have gone up due
to the international price of oil,” he said.
“But the rise will be marginal because the prices have gone
up by, say, just four cents.
“What we are saying is that the impact on price levels will
be there but will be minimal.”
However, Confederation of Zimbabwe Retailers president
Denford Mutashu said the rise in fuel prices would have a huge impact on
consumers.
“Any movement upwards on cost drivers is not welcome in an
economy where most people are living under the poverty datum line and are
ravaged by a shortage of foreign currency, which does not seem to have an end
in sight,” he said.
“Price increases on fuel are not welcome as it is a slap in
the face to the ease and cost of doing business in the economy.
“Like I said earlier, it may push production costs for
manufacturers and subsequently affect the final price for the consumer in an
environment that has not been competitive.”
Consumer Council of Zimbabwe executive director Rose
Siyachitema said while the rise in fuel prices would impact the prices of basic
commodities, the effect would be minimal.
“It is very difficult to attribute it (the rise in the
price of basic commodities) to fuel on the market because there are issues on
the market place like the shortage of cash…there is a basket of things that
would cause the prices of goods to go up,” she said. Standard
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