Fuel prices to go up

HARARE - Cash-strapped Zimbabweans should brace for an imminent fuel hike after government gazetted new pricing regulations.

Statutory Instrument 80 of 2014, crafted by the Energy ministry in consultation with the Zimbabwe Energy Regulatory Authority (Zera) is expected to drive fuel prices up, which in turn will have a domino effect on the pricing of various commodities.

“The selling price by a petroleum company on any petroleum product shall not exceed oil company purchase price plus seven per centum of the oil company purchase price,” the government gazette reads.

“The price should also be a minimum of six United States cents ($0,06) for every litre or a maximum of seven per centum of the oil company’s selling price, in the case of the retail outlet.”

Currently fuel retailers are buying  petrol at $1,44 from suppliers. Although they are supposed to sell petrol at $1,49, they are retailing it at $1,50.

Diesel is being procured at $1,33 but garages are selling it at $1,38, giving them a profit margin of four percent.

Based on the new regulations, fuel dealers now have a legal leeway to explore the remaining three percent from the current four percent.

The government gazette further explains the maximum wholesale and retail pump prices of petroleum at a wholesale depot shall be determined in accordance with the seven per centum regimes.

Efforts to get a comment from Zera on the new regulations were futile as questions sent to the authority remained unanswered at the  time of going to Press last night.

Analysts warn that motorists will be forced to pay more for fuel, leaving cash-poor Zimbabweans worse off given that any fuel price increase drives up the cost of other commodities.

Economist Takunda Mugaga said the decision will have a detrimental impact on the current economic situation.

“It is highly possible the dealers will exploit this opportunity… This decision will reverse the deflationary trend currently being enjoyed by the country,” Mugaga said.

He said the move will affect both the domestic and corporate sectors as fuel drives both spheres.

“As you know most companies and households now run on generators, this will obviously affect them. It is also given that if fuel dealers decide to manipulate this loophole, the prices will start spiralling up,” the analyst said.

Industry players have already warned government over challenges posed by the current operating environment.

“This move by government is potentially fatal as it will increase the production costs in the country, which are already high,” Mugaga added.

“The increased price levels may lead to more retrenchments as companies struggle to meet operational costs, thereby increasing the already high unemployment levels in the country.”

The last time fuel prices went up was in July 2013 after Zimbabwe’s general election which gave a resounding victory to President Robert Mugabe albeit under controversial circumstances.

The country saw a marginal $0,04 increase after prices went down by at least $0,10 in May the same year.

In March last year, government hiked fuel prices to raise cash for elections; a move which saw a price spiral in basic commodities.

Broke and failing to raise money from the international community, coalition partners at the time agreed that Zimbabweans will have to dig deeper into their pockets to bankroll the elections, with government increasing excise duty on fuel by at least 20 percent, a cost that was  passed on to consumers by suppliers.

The imminent hike is likely to be passed on to consumers as well, analysts warn.

Comments (14)

We thought the Greenfuel project of Conrad " Billy" Rautenbach was there to push down the fuel prices and lessen the burden for consumers. What is going on, Cde Mavhaire? We have been lied to for far too long!

Makunun'unu - 14 May 2014

Ndiroka bhora mugedhi, what else can you expect when you have a bunch of crooks in charge?

Disaster - 14 May 2014

kkkkk they want to recover mari yefuel isikunzwisika mafambire ayakaita kuCMED.

Chidondova - 14 May 2014

Unobva watotadza kunzwisisa kuti ndoomabasa eZIMASSET here awa , kuvharwa kwemacompany, kuenda kwemagetsi and this time around kukwira kwemafuta emotokari. BHORA MUGHEDHI WITHOUT DOLLAR MUHOMWE. WHY CAN'T THEY NIKUV THE ECONOMY.

muteteyi - 14 May 2014

it becomes clear that this has benefiting individuals behind it...look at this: they introduce Green fuel and mandate EVERY pertroleum retailer to blend it with UNLEADED, now if prices of fuel go up, does that also not mean they can charge the retailers/ manufacturers more for the GREEN FUEL which the Retailers will have to deal with and accept because it is indeed afterall govment regulation to have it mixed with Unleaded. its all basically a FUND RAISING mechanism to try and rescue the cash strapped Government, blindly not realising that in trying to raise cash, they develop more problems than solutions and indeed pull us back to the 2008 scenarioo i.e. HYPERINFLATION

KayCee - 14 May 2014

it seems we are digging the hole deeper instead of covering it. Where is B. Nyabadza,[Greenfuel man] may be he can help explain why we are digging instead of covering the hole

hooter - 14 May 2014

Was wondering whether you had forgotten your inciting techniques or you were digging more into your box of tricks meant to steer havoc into the minds of this peace-loving nation. Makawoma hama uye ichokwadi kuti satan haanete.

Mbada Murenje - 14 May 2014

Civil servant want their money so where do think the gvt will get the money. Increase fuel price and very soon tax yacho. Do you want the gvt to continue humiliating itself by delaying cs salaries. No no more.

Wings of change - 14 May 2014

Its tragic to say the least.

GM - 14 May 2014

What has happened here is nothing more than setting a pricing mechanism for the industry to allow for fair competition, which should in essence benefit the public. This was long overdue having been an executive in the industry for years. A well researched article could have helped. We now have a tendency of whipping emotions and self pitting as Zimbabweans.

Haruna - 15 May 2014

“It is highly possible the dealers will exploit this opportunity… This decision will reverse the deflationary trend currently being enjoyed by the country,” Mugaga said. Ahh ... Now I'm confused. Deflation yacho is it good thing or a bad thing? It seems to me that a fuel price increase can help solve the deflation problem.

Khan - 15 May 2014

What the article and analysts interviewed fail to capture is the fact that this is designed to assist the fuel dealer (retailer) more than the oil company. The dealers have over the years had to endure sub-economic margins, forcing many to shut down or retrench staff. This legislation allows them to begin to operate more viably. They will not "take advantage" as suggested by the learned analyst, but rather be able to keep their doors open and less people on the streets. Deflation is, in and of itself, not good for the economy, unless deliberately used to reign in the economy. In our case, it is spiralling of its own accord with no initiative from the authorities. It can therefore, easily be as detrimental, if not more so, as inflation.

Tich Tsodzo - 15 May 2014

Does Mavhaire even understand simple economics. It seems all he knows is how to read prepared speeches. Can he explain to us laymen, the importance of Green Fuels in all this?

Dr Know - 15 May 2014

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