Association for Free Research and International Cooperation

Zimbabwe fuel prices up again – 7th time in 2 months

Article from AFRIC editorial
It’s now systematic and predictable that Zimbabwe fuel prices are increasing every week- Mondays. Inside information might be at play as most service stations are now accustomed not to sale as much as they used to on, weekends. The meandering fuel queues which used to characterized service stations over the past few months have vanished not because of abundant supplies but due to fuel high fuel prices. With inflation rate pegged at 560%, eroding the purchasing power of consumers, the upward trend in fuel price – a key component in production – will have a direct impact on the prices across the economy. In the last midyear budget review, the Zimbabwe Finance Minister moved the notion to abandon the publication of inflation rates [for reasons better known to him] whereas most economists and industry watchdog raised concerns on such a move.

As the final week of August ushered, Zimbabweans woke to news of another fuel price hike, fourth increase in August. According to the government, fuel in Zimbabwe has been traditionally low in the region owing to the distortions exacerbated by the parallel market before the introduction of interbank rate as the local currency was trading at par with American Dollar. In January, petrol was retailing at $1.36 per litre. There were three increases in July. Since July, this week’s increase is the seventh.

This week’s price hike saw the pump price of petrol, which is blended with at least 20% ethanol, going up by 89 cents (Zimbabwean dollars) to ZW$10.01. The price of diesel increased by an even larger margin, going up by 96 cents to ZW$10.32 per litre., but the exchange rate was officially pegged at 1:1 between the US dollar and its local transactional instrument, the bond note.

The Zimbabwe Energy Regulatory Authority (ZERA) attributed the latest price increase to “Free On Board price movements and the revised duty regime.” This entails that the government is weekly adjusting the duty on fuel. At least $2.76 and $2.92 of the fuel price goes to the government levied excise duty on fuel.

The local currency, which is also the biggest determinant of fuel prices in the country, has continued to weaken, and as of Monday [25 August 2019] was officially trading at 10.3557 to the US dollar.

Finance and Economic Development Minister Mthuli Ncube has stated on record that Zimbabwe’s fuel prices are low in light of the official foreign currency exchange rate, which is currently around 1:10.3557 between the United States dollar and the Zimbabwe dollar. Considering the price of Unleaded petrol in neighbouring South Africa, oscillating between ZAR15/16, [USD1/1.06] Zimbabwe is slightly cheap but  Zimbabwe petrol is blended with at least 20% ethanol which, ideally, should lead to reduced pump price as ethanol is 100% local content.

Motorists across the country have always aired their disgruntlement over the ethanol component as it lowers energy efficiency and reduces fuel economy of the engine relative to Unleaded petrol. Considering that most vehicles that ply roads in Zimbabwe are grey imports, the general motorists are found wanting by the effects of ethanol on vehicle’s fuel intake components and fuel pump. So far, motorist have not yet seen the benefit of 20% ethanol blend as both price and quality are compromised to the consumer’s detriment.

Article from AFRIC editorial

Photo Credit : google image/illustration

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