The Sunday Mail
DEVELOPMENTS in the local oil industry over the past two weeks have been very comforting.
Government, obviously jerked by both the outrage from the public and the open defiance from petroleum industrial players who chose to stoically maintain unsustainable prices despite the record slump in regional and international markets, decided to intervene by setting the price of petrol and diesel.
As per the Energy and Power Development Minister’s directive, petrol and diesel are now expected to retail at US$1,32 and US$1,20 respectively.
It seems that the determination of the present pricing regime hinged mainly on the freight on board (FOB) prices obtaining at Beira port in Mozambique.
In June 2014 last year, FOB prices at Beira were at 0,88 per litre for diesel and 0,86 per litre of petrol.
They have since declined to 0,57 and 0,52 per litre in that order as at end of December 2014.
Well and proper. At least we can surmise that there might have been a scientific formula that the Ministry used to come up with the prescribed prices.
We can be rest assured that stubborn oil companies will not have any reasonable argument to defy Goverment’s decision.
But when The Sunday Mail Business broke the story of how local petroleum industry players were leading Zimbabweans down the garden path on December 7 2014, it also made the observation that energy regulator, the Zimbabwe Energy Regulatory Authority (Zera), needed to develop a cast-in-stone framework through which the retail price of fuel can be routinely computed.
It must be a transparent framework, a framework that cannot be disputed but is capable of setting a fair price that can easily be agreed to by all the stakeholders. Neighbouring South Africa has a clearly outlined formula of how it calculates its prices.
In essence, the formula, the Basic Fuel Price (BFP), was negotiated by government and industry.
It reflects the realistic cost of importing a litre of product from international refineries with products of a similar quality compared to local South African specifications on a sustainable basis.
Components of the BFP include international petroleum market spot prices, freight cost to bring product to South African ports, insurance costs, ocean loss allowance, cargo dues, coastal storage and stock financing costs .
We need a formula similar to this which takes into account the local peculiarities.
Zimbabwe is not short of institutional entities that are supposed to do this; if anything, we have more than enough of them – Zera, which regulates energy prices; the National Incomes and Pricing Commission (NIPC), to monitor prices; and the Competition and Tariff Commission (CTC), to look out for collusive behaviour.
It is unfair to the taxpayer to continue to pay merely for the continued existence of these statutory creatures.
They must be paid to function, to be relevant to aspirations of the nation.
If we have more than enough statutory bodies to safeguard the interests of the nation, and more than qualified personnel at these entities, then all they have to do is to do their job.
So, Dr Undenge, Government’s intervention at ministerial level in the fuel price debacle is an indictment on these institutional bodies. In Kenya, the fuel price cut, which has seen petrol retailing at a US$1 per litre, was duly announced by the Kenya Energy Regulatory Commission, while in Zambia the reduction was announced by the Energy Regulatory Board.
It is the trend elsewhere, except in Zimbabwe.
