Zimbabwe fuel prices surge
MAJOR fuel retailers in Zimbabwe have swiftly raised their prices of fuel by between five cents and US$0,14 on the back of a surge in international petroleum prices.
A snap survey by this newspaper showed that the price of diesel at some of the capital’s forecourts had moved up from US$0,94 per litre last week to US$1,08 per litre while petrol was now selling at US$1,28 per litre from US$1,23 per litre.
The Zimbabwe Energy Regulatory Authority (ZERA) admitted prices were shifting upwards, noting that this had “been due to the increase in the global prices”.
“Zimbabwe does not produce its own fuel neither does it refine crude oil hence Zimbabwe is exposed to all the global price movements,” ZERA said in response to questions from the Financial Gazette.
“The current prices which are in the market are all within the maximum prices which are set by ZERA. The price increases are limited to the price cap which is set by ZERA hence the increases are expected to move within acceptable margins, these price movements are monitored by ZERA’s compliance team,” ZERA said.
Interestingly, ZERA’s chief executive officer, Gloria Magombo, was quoted by a local weekly this week saying no price increases were imminent. This newspaper had reported last week about the impending fuel price hike.
The development contrasted that in South Africa, where fuel prices went down this month by about 64 cents due to what market players described as “ongoing oil price weakness and marginal improvements in the rand/US dollar exchange rate in February”.
The weakening rand had caused fuel price havoc in South Africa late last year.
The petroleum companies needed no persuasion to adjust prices upwards, unlike in situations when international prices go down.
Last year, players were forced by government to reduce their retail prices after they had maintained the price of petrol at US$1,50 per litre and diesel at US$1,38 per litre, despite the downward spiral in international oil prices. This week, analysts warned of more increases in fuel prices, saying oil companies were “masters of simple economics of demand and supply”.
Reports of a meeting among Organization of the Petroleum Exporting Countries (OPEC) member and non-member countries, which is expected to be held next month in Doha, Qatar to discuss a production freeze, drove this week’s fuel price adjustments in Zimbabwe.
Interestingly, it was the big guys who have the advantages of volumes who pushed up prices, while the smaller players retained prices at old levels. For example, most of the smaller players were retailing petrol at between US$1,21 and US$1,23 per litre, and diesel at around US$0,93 per litre.
Being a net importer of petroleum products, the production freeze will push prices further up, a situation which is going to have an impact on Zimbabwe’s other sectors of the economy.
Key cartel members include Libya, Saudi Arabia, Kuwait, Qatar and Algeria. Russia will be at the meeting as a non-member.
On the international market, oil prices went up sharply over the past two weeks to hit about US$40 a barrel of crude oil from a record low of US$28 per barrel recorded in January this year.
The price of crude oil had been on a freefall since June 2014 after touching a record high of US$118 per barrel before receding to US$28 per barrel early this year.
Local petroleum prices are still far higher than those in other countries in the region.
The fuel price increases are certainly going to have a detrimental impact on the frail economy, as prices of other commodities are expected to rise as businesses cushion themselves from high costs.
Non oil-producing countries like Zimbabwe are likely to suffer from the price surge as this would affect the cost of logistics, which would in turn affect commodity prices across the board.
This would have the effect of further derailing economic revival efforts in the country, whose growth has been projected at 1,4 percent this year by the International Monetary Fund.
Follow us on Twitter on @FingazLive and on Facebook – The Financial Gazette