ZERA says we have enough fuel for the holidays but this could be the beginning of a crisis

Over the past week, we have seen something we have not seen in a while. Fuel queues at service stations suggest fuel shortages. That is rather odd considering the fact that ZERA sets price ceilings that are generally well above the standard price of fuel around the world. The most affected fuel has been petrol. Last week ZERA came out to address the shortage which they blamed on a temporary breakdown at a pumping station in Mozambique. The fact that the issue is temporary seems to suggest that the shortages are temporary too. To further allay fears ZERA has also just issued another state saying we have enough fuel in the country to cover the coming holidays.

The Zimbabwe Energy Regulatory Authority (ZERA) wishes to inform the motoring public that the country has adequate fuel supplies to meet the current demand, as well as the coming festive season.

The Authority notes that there was a downtime of the fuel terminal in Beira, due to repairs taking place at the port following damages caused by Cyclone Idai. Normal pumping then resumed on the 4th of December 2021.

The petrol situation in the country is expected to be restored to normalcy from Monday, 13 December 2021. The diesel situation remains normal.

The Authority is closely monitoring the fuel situation in the country and assures motorists that the country has adequate fuel supplies, and therefore no need to panic.

ZERA’s statement on the issue

Possible beginning of a crisis?

One important thing that we need to underline is the fact that there is no need for panic. ZERA is right on that part. It is also important to note that there is no evidence that this is anything but a temporary shortage that is likely to get better as the underlying issue is resolved. This makes it different from the shortages which began in 2018 and lasted for the better part of 2019. Those shortages were caused by the government’s banal policy of trying to force fuel companies to use the official rate and make them sell at prices well below the market price of fuel. Service stations were also not allowed to sell fuel exclusively in US dollars back then.

This is in stark contrast to the policies we have now. Under Direct Fuel Imports (DFI) the bulk of fuel in this country is imported by fuel companies using so-called “free-funds”. They are allowed to sell this fuel exclusively in US dollars. Although ZERA does set maximum pump prices these ceilings, as they are known in economics, are well above the market price for fuel to the extent that not one fuel company charges prices that high not even on their roadside service stations that tend to have higher prices.

Again there is no need to panic here. Such logistical induced shortages are not uncommon. We have seen then this year in countries such as the UK and US that are considered paragons of efficiency. The lesson is that no country is immune to such shortages and it would make little sense to blame the government of Zimbabwe for something they didn’t cause. So to reiterate there is no need for panic we should probably see supplies improve in a couple of weeks as the crisis abates. Even in the worst-case scenario if this improvement doesn’t happen panic will not make the situation better anyway.