We had gotten used to it, at the beginning of each week we would wake up to a government announcement saying that fuel prices had been adjusted upwards.
Well, this time the government couldn’t even wait for Monday. Yesterday the Zimbabwe Energy Regulatory Authority (ZERA) announced the latest fuel price hike. Spoiling the weekend for many people.
| Diesel/Litre | Blend E20/Litre | |
|---|---|---|
| FOB price | USD 0.6052 | USD 0.5888 |
| Effective Exchange Rate | ZWL 7.5000 | ZWL 7.500 |
| ZIMRA Duty (Using ZIMRA's Own rate of 9.0938 | ZWL 2.4883 | ZWL 2.7323 |
| Oil Company Margin | ZWL 0.4796 | ZWL 0.4767 |
| Dealer Margin | ZWL 0.5930 | ZWL 0.5895 |
| Total (Maximum Pump Price) | ZWL 9.06 | ZWL 9.01 |
Diesel more expensive than petrol
Diesel is the fuel that drives industry and in most countries, it sells at a price lower than petrol. This was the case in Zimbabwe too until this latest price increase. Prior to this petrol was selling for ZWL 7.55 while diesel was selling for ZWL 7.22.
According to the authorities, the reason why the price of diesel is now higher is that it is in higher demand for industrial generators. The industry has been reeling from the massive powercuts the country has been subjected to.
However, given that the fuel sector is not being operated on market principles it is a rather bizarre act by the authorities to cite demand for a price increase.
Also after the government increased excise duty on fuel from 19% (petrol) and 16% (diesel) to 45% and 40%, respectively, expect shortages to continue. This is because oil companies and fuel garages (service stations) make less per litre of petrol and diesel than they make from selling bread!
Most of the cost goes back to the government in the form of taxes and duty. Why the government is imposing taxes and duty on fuel is a mystery. They say the goal is to sell fuel at around USD $1 per litre which matches prices in the region.
Another aim should be to liberalise the market and allow more players into the sector. Prices might initially rise but they will come back down once more players enter and supply improves.
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