eBusiness Weekly
Golden Sibanda
The Zimbabwe Energy Regulatory (ZERA) says the need to adjust the local currency prices of fuel was driven by depreciation of the domestic currency against the US dollar and the increase in the excise duties for the petroleum products.
But analysts insisted that Zimbabwe’s fuel prices should have come down or at least stayed unchanged given that global oil prices had plummeted nearly 50 percent since January due to low demand, oversupply and price wars among major producers.
Other regional countries like South Africa and Malawi have cut retail pump prices for fuels, including LPG gas, on account of the tumbling global prices of Brent crude.
Analysts also argued that failure by Zimbabwe to accrue the benefits of the fall in international prices exposed gaping weaknesses in the country’s regulatory systems and enforcement of policy.
This comes after ZERA last week approved increases in fuel prices from $18,70 to $21,52 per litre of petrol and $18,66 to $21,77 per litre of diesel effective April 5, 2020.
ZERA said on Monday the increase in fuel prices was necessitated by the depreciation of the Zimbabwe dollar against the greenback after the local currency slid from $18,43 to the US dollar to $25, now on temporary fixed peg.
The Reserve Bank of Zimbabwe fixed the Zimbabwe dollar exchange rate just over a week ago as part of broad measures to minimise the negative impact of the Covid -19 pandemic on the domestic economy.
ZERA acting chief executive Edington Mazambani, told Business Weekly in an interview that the exchange rate movement and increase in excise duties for diesel and petrol had made it inevitable to increase the fuel pump prices.
“If you compare in terms of global prices you should be fair on Zimbabwe to say the price in US dollar terms has actually come down.
“Our price in US dollar terms if you divide by $25, lets say the price of $21,52, the price is about US 86 cents.
“Regionally, you are looking at prices upwards of US$1,10 per litre of petrol and our price for petrol before this was US94 cents per litre of diesel,” Mazambani said.
He said the excise duty for petrol had been increased from $4,24 to $7,28 per litre while that for diesel had been hiked from $4,26 per litre to $5,82.
“It’s essentially because of the exchange rate movement and the increase in excise duty,” Mazambani added.
Zimbabwe spends an average of US $1,3 billion on fuel imports every year although it has mandatory regulations for petrol blending with ethanol, with current threshold of 20 percent; ethanol to unleaded petrol.
DEAT capital managing director Nicky Ncube commented: “Shocking to see fuel prices going up during lockdown when global Brent crude oil price has plummeted on world market.
“In January 2020, the price of one barrel of Brent Crude oil was approximately 63,82 US dollars per barrel. And this past week $29,94 per barrel.
“What voodoo price economics are our learned leaders using to educate Zimbabwe and that petrol price must still go up ?”
The huge global fuel price drop is largely due to a record fall in the global oil price to around $20 a barrel on the back of the spat between oil heavyweights Saudi Arabia and Russia, as well as reduced demand due to the Covid-19 outbreak, which has cut travelling and consumption by airlines and other industries.
