By Tatira Zwinoira
Fuel prices in Zimbabwe have in the past few weeks gone up by at least 5 cents to US$1,32 and US$1,16 per litre for petrol and diesel respectively. The increase has been attributed to changes to Free On Board (FOB)price. This has raised fears of commodity price rises in an economy already weighed down by a liquidity crunch. Fuel dealers 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. In February, prices were an average of between $33 and $38 per barrel. This lead to a downward review of fuel prices in Zimbabwe. Then, the local price stood at $1,35 and $1,25 for petrol and diesel respectively. The price was further reduced to $1,27 and $1,02 respectively.
What ZERA said
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,”
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.
Regional fuel prices
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 their proximity to ports. Others have fuel semi-subsidised while the likes of South Africa have refineries hence 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. These include FOB, freight, duty, Zinara road levy, carbon tax, debt redemption, strategic reserve levy and storage. Of the factors affecting the price of fuel, the most influential are the FOB and duty.
According to the SI, the price of duty per litre is $0,45 and $0,40 for petrol and diesel. FOB, which is dependent on market forces, is $0,474 and $0,472 respectively.
Diesel 50, emits more carbon gas and as such, the cost also stands higher at $0, 478.
What the operators said
Zuva Petroleum CEO Bothwell Gumbo confirmed prices in Zimbabwe were affected by FOB and duty.
“If you look as of February, our duty, Zinara levy, debt redemption, and all our taxes and levies take up $0,461 and $0,632 for diesel and petrol respectively,” he said.
Confederation of Zimbabwe Retailers president Denford Mutashu said fuel price increases had a tendency to force prices upwards.
“The market is subdued at the moment as demand for goods and services has been low. That might see prices of goods remaining where they are and /or if at all they rise, it will be marginal. “The fuel price increase will only act to erode retail margins as there is no space to raise prices at the moment.”