Zim: Fuel price still high despite drop in cost of crude oil

zimbabwe

Fuel prices in Zimbabwe have remained high despite the price of crude oil dropping to a record low, just under $35 per barrel, on the international commodities market.

The drop in the price of crude oil was recorded on Wednesday and is the lowest in the past 11 years.

The reason behind the drop is a large build-up of gasoline supplies in the United States and the strengthening of the dollar.

In September last year, fuel prices for petrol and diesel were nearly $1,40 and $1,20 respectively. However, government ordered fuel suppliers to lower the price of petrol and diesel by 7cents and 5 cents respectively.

As a result, the reduction meant that the minimum price for petrol and diesel should be $1,28 and $1,15 respectively.

Zimbabwe Energy Regulatory Authority (Zera) acting chief executive officer Eddington Mazambani said the reason why the effects were not being felt in Zimbabwe was the lead time between processing crude oil and importation.

“Zimbabwe is using the United States dollar, so the fall of the international prices is not immediately felt in the economy due to the lead time between processing crude oil through to the actual procuring and receiving of products in the country,” Mazambani said.

“Currently, Zera commissioned the Petroleum Sector Pricing Study in order to review and update the current pricing models.”

He said the current pricing model was based on free on board (FOB), government levies and taxes, storage and handling plus margins for wholesalers and retailers summarised in Statutory Instrument (SI) 80 of 2014 which has been updated with SI 20 and 100 of 2015.

The review on fuel pricing shows that the average profit made by fuel dealers off every litre sold of either diesel or petrol was 6 cents.

However, despite the stipulated minimum price, the average range in prices for petrol and diesel in the country is still high getting to as much as $1,35 and $1,25 respectively.

As prices continue to remain high, the international website Global Petrol Prices, which compares fuel prices across the globe in United States dollars, shows that Zimbabwe was uncompetitive in terms of fuel pricing.

Out of the 179 countries recorded on the website, in the order of cheapest to most expensive, Zimbabwe’s ranking for petrol and diesel is 167 and 165 respectively.

Standardbusiness conducted research and drew comparisons on the 10 regional countries’ surrounding Zimbabwe, namely Zambia, Mozambique, Malawi, Lesotho, South Africa, Namibia, Angola, Botswana, the Democratic Republic of Congo and Swaziland.

The research showed that when correlated together, the average petrol and diesel price per litre is $0,92 and $0,85 respectively, lower than the current market prices prevalent in the country.

It showed that Zambia’s average fuel price for petrol and diesel was $0,89 and $0,77, Mozambique $1,04 and $0,81, Malawi $1,13 and $1,16 Botswana $0,75 and $0,71, and South Africa $0,80 and $0,65

The previous low in crude oil was during the global recession between its breakout in 2008 and 2009 but later bounced back on an upward trajectory as the global economy stabilised.

But, with the discovery of more crude oil, analysts are predicting an increase in fuel supply and therefore a decrease in the prices.

The drop in the price of crude oil has been consistent since February 2015 to date, from between $60 and $65 to the current record low price. During that period, there were spikes in the price such as May which recorded nearly $65, September ($53) and November ($50).

Mazambani said in Zimbabwe, fuel was imported from the Arab Gulf and Euro Mediterranean region and that the country had adequate fuel supplies.

Source: Zimbabwe Daily