International fuel prices cushion Zim
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.