In­ter­na­tional fuel prices cush­ion Zim

The Sunday Mail (Zimbabwe) - - BUSINESS NEWS - Tawanda Musarurwa

WHILE fuel prices in­creased on De­cem­ber 1, 2018 as the new ex­cise duty on the com­mod­ity came into ef­fect, the hikes were mar­ginal as the Zim­babwe En­ergy Reg­u­la­tory Au­thor­ity (Zera) fac­tored in the pre­vail­ing global prices of Brent crude.

Gov­ern­ment, in the 2019 Na­tional Bud­get, in­creased ex­cise duty on diesel and petrol by 7 cents and 6,5 cents per litre re­spec­tively.

Diesel is now sell­ing at $1,34 a litre from $1,30; while petrol has gone up to $1,38 a litre from $1,34.

Zera has ex­plained that prices are re­viewed ac­cord­ing to fluc­tu­a­tions in the in­ter­na­tional oil mar­kets, al­though there is a two-week lag since Zim­babwe is land­locked.

De­spite re­cently hit­ting its low­est level in over a year, the price of crude oil is sta­bil­is­ing.

Brent crude oil is cur­rently hov­er­ing around $60 per bar­rel.

At the be­gin­ning of last week, crude oil was in a po­si­tion to post one of its big­gest one-month de­clines in Novem­ber since the worst of the 2008 fi­nan­cial cri­sis, hav­ing dropped about 22 per­cent.

An­a­lysts say the key fac­tors driv­ing the prices this month has been the in­creas­ing sup­ply from the United States and Saudi Ara­bia.

Zera act­ing chief ex­ec­u­tive of­fi­cer Mr Ed­ding­ton Mazam­bani said some of the re­cent ad­just­ments in re­spect of the global oil price had negated the ef­fects of the in­crease in duty on petrol and diesel.

“Last week, Zera pub­lished its prices. When the duty came into ef­fect, the price of diesel was $1,30 while petrol was go­ing for $1,37. In­stead of sim­ply adding the 7 cents duty, which would have pushed the price of diesel to $1,37, the price ac­tu­ally set­tled at $1,34. The dif­fer­ence was cush­ioned by the in­ter­na­tional oil price. In the same vein, petrol would have gone up to $1,44, but it is now sell­ing at $1,38

“For next week’s prices, which we are set­ting to­day (Thurs­day 6), there will be a fur­ther de­crease in the price be­cause of the pre­vail­ing in­ter­na­tional oil price. Zim­babwe is land­locked and there­fore when in­ter­na­tional prices fall, we don’t im­me­di­ately feel the im­pact. Our prices are ac­tu­ally two weeks be­hind,” ex­plained Mr Mazam­bani.

“The fall in the price of in­ter­na­tional prices will fil­ter into the coun­try af­ter two weeks. How­ever, Zera an­nounces fuel prices that take into ef­fect the cur­rent FOB prices on a weekly ba­sis.”

Ac­cord­ing to the In­ter­na­tional Mon­e­tary Fund (IMF), to bal­ance its bud­get, Saudi Ara­bia needs oil to trade just above $73 a bar­rel next year.

It is es­ti­mated that the Or­gan­i­sa­tion of the Pe­tro­leum Ex­port­ing Coun­tries (OPEC) and other ma­jor oil pro­duc­ers need to slash out­put by some 1,4 mil­lion bar­rels per day to mean­ing­fully boost prices.

An­a­lysts at Akri­bos Research Ser­vices have claimed that Zim­babwe’s pump fuel prices are cheaper than other coun­tries.

“In Zim­babwe, petrol is re­tail­ing at an av­er­age $1,41 per litre. Ap­ply­ing the par­al­lel mar­ket rate of 3,5 im­plies that petrol in Zim­babwe is at $0,40 per litre, which is cheaper than Switzer­land and even United Arab Emi­rates. The ques­tion is who is cov­er­ing such a huge sub­sidy? Some­one will have to pay the price!” said the an­a­lysts.

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