Government has released $20 million to buy 44 million
litres of fuel to deal with stock-outs of the commodity and has reviewed fuel
prices upwards in order to “deal a blow on pricing distortions and arbitrage
opportunity”.
Fuel shortages have been disruptive on business activity
and discomforting to both the motoring and commuting public.
Demand for the precious liquid has risen significantly in
the past six months, as diesel consumption has jumped to 4 million litres per
day from an average 2,5 million, while petrol consumption has grown by 100
percent to 3 million litres.
Local petrol consumption is notably 1 million litres more
than the average daily demand in Zambia (at 52 million litres per month), whose
population is more than 17 million.
Addressing a town hall meeting organised by Global Shapers
Community Harare in the capital on Friday, Finance and Economic Development
Minister Professor Mthuli Ncube said authorities were aware that the chaos in
the sector was being worsened by the price differential for the commodity
existing across borders and within the country owing to parallel market
exchange rates.
“Basically, on Friday last week, we authorised the drawdown
of $20 million to deal with the crisis and those funds were made available yesterday
(Thursday), because it takes a few days (to reflect) . . . so that should
enable us to receive about 44 million litres on the back of that release.
“That is only a blood transfusion to deal with the fuel
crisis,” said Prof Ncube.
“But a lot is going on in the fuel sector. We are also
quite aware of the arbitrage opportunities that have been created by the price
of fuel relative to its price outside Zimbabwe and also relative to the
parallel market. We are quite aware that there is round-tripping either across
borders or between parallel market and the fuel market. And there is a whole
parallel market for fuel in the first place, where fuel is being sold, is it
for $4 or $5 per litre? Those are the figures that I keep hearing. So you have
got these distortions in the market that are making the situation worse. . .
“Of course, we have a forex shortage – that is a fact – but
perhaps just through currency reforms and getting the right pricing for fuel,
that will deal a blow to pricing distortions and arbitrage opportunity,” he
said.
Price distortions
Fuel prices before yesterday’s review ranged between $1,32
– $1,36 per litre for diesel and petrol – which presumed a 1:1 exchange rate
between the US and RTGS/bond note – translated to prices of US41 cents and US43
cents on the parallel market, where the exchange rate is 1:3.
The discrepancies naturally created arbitrage opportunities
in the market, as speculators hoarded the commodity for resale on the lucrative
black market or to sell across borders.
Already, there have been reported cases where fuel tankers
allegedly smuggling fuel have been confiscated in neighbouring Zambia.
Prices in the southern African country range between 14
kwacha and 16 kwacha ($1,22 to US$1,33 using the current 1:12 exchange rate).
However, most interestingly, the old fuel prices are
comparable or even lower to those of oil-producing countries on the continent
or in developed countries.
In Nigeria – the continent’s largest oil producer – average
fuel prices are US35 cents per litre, while in Angola prices are pegged at
US52c, USA ($1,08), Russia (US0,68c), Iraq (US63c), and Saudi Arabia – one of
the world’s largest oil exporters – prices are pegged at US54 cents.
Heavy cost
It is believed that Government was essentially subsiding
the local market and paying heavily through hefty foreign currently allocations
to the sector.
The Reserve Bank of Zimbabwe (RBZ) recently doubled foreign
currency allocations to fuel dealers from $10 million to $20 million per month.
Hesitation
Market watchers say Government might have been reluctant to
adjust fuel prices for fear of the possible impact this might have on local
prices, which are already considered steep by consumers.
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