By now you have probably heard, the Zimbabwe Energy Regulatory Authority (ZERA) has just announced another fuel price hike hot on the heels of their usual 5th of every month announcements. Diesel is now selling for US$1.68 per litre and Petrol is now selling for US$1.67 per litre. You can expect ZERA to review the price of LP Gas upwards too. That’s not all. Expect things to get worse in the near future. If the trend continues, we will be paying as much as US$2.50 per litre or even more soon. There are no rewards for guessing the cause for this either. It’s pretty obvious.

Last week we warned that while it might seem like the war between Ukraine and Russia is in a far far away land there were going to be some real consequences for Zimbabweans. Thanks to the United States and an equally belligerent West who have been playing Russian (pun intended) roulette with the global economy and shooting ill-thought sanctions from the hip in a bid to dissuade an equally aggressive President Putin, we are going to be paying through the nose for fuel and as a result just about everything else. This does not bode well for the Zimbabwean economy.

In a bid to punish Russia the US and the United Kingdom have been announcing all sorts of sanctions left right and centre. Their latest one is that they will no longer be buying Russian oil. They can afford to do so because the U.S barely imports oil from Russia anyway but there are three issues:

  • Either directly or indirectly the U.S is going to use it’s hold on the financial world to try and pressure everyone to quit Russian oil too.
  • Global oil supplies are limited and there were already shortages before this whole mess. As each country scrambles to quit Russian oil expect demand to outstrip supply. The U.S already has so many sanctions on major oil producers like Venezuela and Iran. Prices are expected to cruise past the US$150 per barrell price.
  • In feel good announcements a lot of companies are ditching Russian oil including companies like Shell. Without oil production in Russia even if countries like China were to risk buying that oil there wouldn’t be enough of it anyway.

All these factors are going to conspire to create a fuel shortage the world over and Zimbabwe will not be spared. You will notice we haven’t even spoken about the fact that Ukraine and Russia export a lot of wheat among other things to Zimbabwe. We get about 50% of our wheat from Ukraine. We are in trouble on that front too. Russia exports a lot of fertilizer even if we don’t buy a lot of it those countries that do contribute to the global food supply. Decreased food suppliers have a way of hitting us harder as we have less money to spend. All this is going to be dwarfed by the coming fuel crisis.

Fuel is input in just about everything. All businesses use it. If its price goes up it means the cost of production goes up. It means labour costs in the form of transport allowances go up. Factor in the above issues and the likely drought we are going through and foresee chaos and pain ahead. Lots of pain and choice. Most of it man-made and a result of some faraway war. There is some good news. Expect some real backlash from consumers around the world against the U.S and Russia as the crisis bites. Moral outrage fueling some of the stupidity we are seeing will give way to pragmatism. But first, we will have to endure some painful moments ahead.

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