Source: Fuel prices skyrocket – The Standard May 13, 2018

THE Zimbabwe Energy Regulatory Authority (Zera) has blamed skyrocketing fuel prices on the surge in crude oil prices in recent weeks.

BY TATIRA ZWINOIRA

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.