Let’s start thinking about rationing fuel

07 Dec, 2018 - 00:12 0 Views
Let’s start thinking about rationing fuel

eBusiness Weekly

Zimbabwe spends more than US$1 billion a year on importing petrol and diesel, the largest single drain on scarce foreign currency earnings, and at times there is a gap between payments causing stock-outs and then long queues, black-marketing trading and other distortions as payments resume, even when there is a catch-up component.

The long queues we see now whenever a tanker delivers fuel to a service station highlight the sometimes erratic payment system and cause the waste of hundreds of thousands of productive man hours each week. There has to be a better way.

The authorities are correct when they say there is always adequate stocks of fuel physically in Zimbabwe. Oil companies have been quite willing to maintain adequate stocks at the Msasa depot with its large complex of underground tanks. However, the fuel is not released for delivery until acceptable foreign currency payments have been made.

And even when fuel is released, deliveries cannot be instant. The road tanker fleet needs to load, and obviously fleets of tankers cannot load simultaneously. Then tankers have to spread out across Zimbabwe to deliver fuel, and a tanker going to say Dete is not going to be round for a second delivery for two or three days. So there is a logistics bottleneck when there has been a payment delay, making the queue problem worse.

The shortages are exacerbated by ethical and non-ethical practices. Many motorists start hunting down queues as their tanks hit three-quarters full. Many try and buy a few extra litres to store at home to carry them through the next shortage. This is understandable but it adds to demand. Then we have the black markets. Some service stations are involved, but there are a lot of others, from those people queuing with jerry cans, possibly claiming falsely that they need fuel for generators, to those who spend each day in a queue and siphon their purchases when they get home.

Pricing fluctuates a lot less than crude oil prices. This is because refining charges, shipping charges, port fees and the pumping charges on the Beira-Feruka pipeline, the additional foreign currency charges on top of the US dollar crude price, are charged on volumes, not on percentages of the crude price. So huge crude price fluctuations are flattened to perhaps a maximum of 20 percent on foreign currency payments. But still that means when crude prices are high more foreign currency is needed for imports. Pump prices fluctuate even less since the RTGS charges — the Feruka-Msasa pumping charges, the taxes, and the mark-ups for the companies that deliver fuel to service stations and the stations themselves — are again volume rates.

That is why big crude fluctuations this year saw pump prices vary by around 13 cents a litre maximum.

In an ideal world the Reserve Bank of Zimbabwe would release foreign currency for fuel on demand. There is a reasonable attempt to do so but there are limits. And Zimbabwe sometimes passes them.

So what is needed is some way to reduce demand to levels Zimbabwe can comfortably pay for. From what we have seen in the last couple of months, a cut of 10 percent, or even 20 percent, would make life a great deal easier and ensure regular adequate supplies. This need cause no hardship.

Most drivers can cut consumption easily by 20 percent by driving more carefully, obeying speed limits and thinking a bit before making extra journeys. It is obvious that there is a lot of wasted cruising. Even kombis could cut fuel use by following safe driving practices.

The recent queues have seen far better driving as many stretch their tank a bit, and defer another queue, by driving more sensibly. We know what to do but it takes pressure to actually get better consumption. Major companies that maintain transport fleets properly, monitor drivers and generally make sure that everyone follows simple rules have cut their fuel costs by cutting consumption. Cost can be a pressure point. The new extra tax of 6,5c on a litre of petrol and trifle more on diesel were meant to apply more pressure but were applied when pump prices reached their lowest level for months and so the effect has been limited. Even with the extra tax pump prices are still lower than two months ago.

So what other pressures can be imposed? Raising the tax again might help but if crude prices suddenly rise then hardship could result. But it is an option. A major campaign to get Zimbabweans to understand that the more fuel they save the more currency will be available for other essential needs is worth considering. When we think of medicine, wheat for bread, soya bean for cooking oil and the like, a trade-off is obviously desirable.

Rationing is the extreme solution, but must now be debated. There are many ways of rationing. The simplest would be to have every vehicle registered with a service station and that station gets weekly deliveries according to the number and types of vehicle. Drivers would then sign the list next to their vehicle registration number for their weekly ration.

Printed coupons are an old fashioned system, but possible, although modern technology makes an alternative both easy to use and hard to manipulate.

A good system would be Zinara issuing a machine-readable fuel card when a vehicle is licensed with the weekly ration built in for the number of weeks the owner had licensed the vehicle and with the registration number prominently displayed on the card.

Rations could be reasonable and based roughly on mass of the vehicle and a decent percentage of the likely full tank. Basically the card would allow a fixed number of litres each week, easy to programme. One wrinkle would be to allow only one visit to a service station in that week, or a limited number of litres on each visit regardless of ration.

Commercial operators, including kombi owners, would need to have higher rations but the far smaller commercial fleet could be dealt with more individually. Business leaders would be consulted on the best and most efficient scheme to keep the wheels of industry and commerce turning.

Printed coupons would encourage a black market but the “card coupon” would limit this since the card and the registration number would have to match. But, to ease the wheels and discourage a black market, extra fuel could be made available at a US dollar cash price in a set number of carefully monitored service stations; the monitoring would be to ensure fuel bought in the normal way was not diverted.

During UDI there were far more complex rationing schemes, based on vehicle mass and distance from work, but with vehicle ownership many-fold higher these would be almost impossible to administer.

Most importantly we are now a democracy and we should now engage in a debate on how best to manage our fuel supplies so as to keep the foreign currency outlay under control. There are many options, but we need to choose one.

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