By Phillimon Mhlanga
Zimbabwe’s major fuel retailers have raised fuel prices by at least US$0,04 a litre due to a serious shortage of anhydrous ethanol in the country and a surge in international petroleum price, the Financial Gazette reports.
Government directed petroleum players in the country to blend all petrol using a mandatory blending ratio of five percent ethanol and 95 percent unleaded petrol to stem rising costs.
But sources in the industry told this newspaper that there was acute shortage of ethanol, currently being produced by Green Fuel, due to excessive rains and shortage of sugar cane in the lowveld.
A snap survey by C&M indicated that at Zuva Petroleum retail outlets, petrol prices went up to US$1,36 per litre on Friday last week, from US$1,31 in December 2016. Also, the price of a litre of diesel has gone up; it is currently retailing at US$1,21 per litre, from US$1,19 per litre. Diesel 50 is selling at US$1,28 per litre.
Petrol prices at Total Zimbabwe outlets shot up to US$1,36 per litre, from US$1,32 per litre, while the price of diesel increased to US$1,21 per litre, from US$1,19 per litre.
Puma is also charging US$1,36 a litre for petrol and US$1,21 a litre for diesel.
The pump price of petrol at Engen is now US$1,35 per litre, while diesel is selling at US$1,22 per litre. Diesel 50 is selling at US$1,28 per litre.
These prices are still far higher than those in other countries in the region.
The increase is 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. This would have the effect of further derailing economic revival efforts in the country. Fuel has a huge influence in the development of the country and its price is a vital macroeconomic variable.
There is a strong correlation between fuel prices and economic strength. This means that a fuel price increase has devastating influence on Zimbabwe’s economy. It results in upward pressure on the cost of production.
As a consequence, it is likely to make life tougher for suffering consumers across the country. Business expressed dissatisfaction at the development.
“Unfortunately, the challenge is that the increase in fuel prices impacts negatively on our cost of doing business,” said Sifelani Jabangwe, the Confederation of Zimbabwe Industries vice president.
He added: “The increase pushes up prices of products, a situation that affects our competitiveness as a nation.”
Davison Norupiri, president of the Zimbabwe National Chamber of Commerce, said the business sector had been left vulnerable by the increase in fuel prices. He said it had now become more costly for business to get goods to the market and the development was now putting pressure on companies to increase product prices.
“This means that distribution and service costs will go up forcing business to pass on the cost to the final consumer, unfortunately,” said Norupiri.
“This is an additional cost to business, which will now push companies out of their way and at the end of the day products will become uncompetitive.”
The Zimbabwe Energy Regulatory Authority (ZERA) acknowledged that fuel prices had gone up, noting that this was “in response to global price movements which have been increasing”.
“The global increase coincided with the reduction of ethanol blend in the country which also contributed to an increase of the final pump price of blended fuel,” said ZERA chief executive officer, Gloria Magombo
“At the global level, OPEC (Organisation of the Petroleum Exporting Countries) has been restricting supply of oil in the last quarter of 2016 with a drive to reduce output by about 1,2 million barrels a day by January 2017. The impact of this drive is to push the price of crude oil upwards. Zimbabwe is largely a price taker within the oil sector given its geographical location. This leaves little room for the oil market to manoeuvre resulting in the petroleum prices being adjusted in response to movements within the petroleum value chain,” she added.
Globally, oil prices have been on an upward trajectory, with the price of the commodity having gone up to about US$53,13 a barrel from about US$47 per barrel in December 2016. This comes after the 13-nation OPEC decided to cut production.
Reports indicate that Saudi Arabia, the world’s largest exporter of crude oil, cut its output by more than 10 million barrels a day, pushing prices up this month. From 2010 to 2014, oil prices were at levels between US$80 and US$110 a barrel. In 2015, oil prices crushed from the US$110 level in mid 2014 to its lowest of US$27 a barrel.
Oil prices, however, started recovering in mid 2016 to reach US$47 a barrel at the end of the year. The Zimbabwe economy is at the moment being sustained by a deal between the Reserve Bank of Zimbabwe and Sakunda Holdings, which was granted the right to supply the country with 160 million litres of fuel.
The deal was supported by Pan-African bank, Ecobank. Zimbabwe, which consumes about 2,5 million litres of diesel and 1,5 million litres of petrol daily, is an importer of fuel, which is the biggest consumer of foreign currency in the country. Financial Gazette