Fuel price not single factor to price increases

17 Jun, 2018 - 00:06 0 Views
Fuel price not single factor to price increases

The Sunday Mail

Petrol and diesel are the widely used sources of energy in the world and are thus almost indispensable in the day-to-day living of man and the running of economies.

From heating and cooking, powering of industry, to transportation of both people and goods, the uses of fuel can be said to be as important as existence itself.

And one writer curiously described fuel as the “hypothetic oxygen” of an economy without which it cannot survive.

The metaphor could not have summed Zimbabwe’s fuel situation better.

Since independence, the economy, still very much on a recovery path, has suffered brutally, even to the petite fluctuations in the international and regional fuel markets.

The recent surge of international crude oil prices from $47 a barrel to around $72 a barrel typifies this fact.

It left local petroleum and diesel prices sky-rocketing.

Surveys show that diesel is now selling at about $1,30 per litre, up from $1,23; while blend is now selling at $1,45 up from $1,35.

The development was a drawback to Government’s latest reduction of excise duty on petrol and diesel by 6 and 7 percent respectively.

Cash and ethanol shortages have also been blamed for the current situation.

Sadly, whatever the causes, the brunt is borne by the general public who have to dig deeper in their pockets to pay for basic goods and services, as businesses usually pass any additional costs to the consumer.

And it is being reported that prices of commodities and appliances, which had been decreasing since their infamous upward trek in September 2017, are beginning to rise again.

However, some sections have dismissed the notion, saying the effects of fuel price increases are minimal and have not caused any price increases.

A snap survey carried out by The Sunday Mail Society concluded that prices of basic commodities have largely remained stable despite the fuel price increases.

At an average price of $3,60 for 2 litres of cooking oil, the price remains unchanged from those experienced in December last year.

Beef economy has actually gone down from around $8 a kilogram in December 2017 to about $5. Brown sugar also remains largely unchanged at around $2 for 2 kilograms. However, a standard loaf of bread, which was selling for $0,90c in December, is now going for $1.

According to a survey carried out by the Confederation of Zimbabwe Retailers, prices in Zimbabwe’s major supermarkets such as OK, Pick N Pay and Spar have remained stable for the standard food basket with minor fluctuations from time to time.

The Consumer Council of Zimbabwe (CCZ) does not believe that increase of basic goods can be traced to fuel as a single factor.

“When we survey prices in the process of coming up with the food basket, we engage retailers and consumers on factors behind cost drivers,” says executive director Ms Rosemary Siyachitema.

“And in our consultations, we found out that the three-tier pricing system and the shortage of foreign currency are also behind price increases. But of course fuel is a major factor in cost driving because most of our goods are imported from South Africa and are transported by road.”

Confederation of Zimbabwe Retailers Association (CZRA) president Mr Denford Mutashu agreed with CCZ.

He said there is no notable direct relation between the recent fuel price increases and those of basic commodities.

“There was a marked increase on imported products, probably due to transport costs and forex exchange issues.”

However, the obtaining phenomenon is not new.

The fuel situation in Zimbabwe has oscillated between stability and instability since the turn of the millennium. Sadly for the local motoring population, fuel prices in the region are comparatively lower.

In Zambia, the price of petrol and diesel has been averaging $1,38 and $1,20 per litre respectively.

In Malawi, prices have remained at $1,14 and $1,13; with the government using a price stabilisation fund to keep the prices in check.

In South Africa, prices are on the rise, but are averaging $1,19 and $1,07 respectively. Explaining the factors behind this situation, Zimbabwe Energy Regulatory Authority (ZERA) chief executive officer, Engineer Gloria Magombo, recently said Zimbabwe’s long-term troubles are a result of a combination of factors.

“Differences in the price movements are due to a number of reasons such as foreign currency fluctuations, subsidies embedded in their pricing models in some countries, different market structures, for example, the presence of refineries, distance from ports for landlocked countries, size of markets (larger countries enjoy economies of scale), different taxes and levies, and different price stabilisation mechanisms.”

Research also shows that fluctuations in price can be linked to SASOL (South Africa) shut downs for maintenance, and the subsequent demand for the product in that country.

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