Zimbabwe defends high fuel prices

HARARE – Zimbabwe’s government has defended high fuel prices obtaining in the country despite a significant decline in international oil prices by more than 70 percent in the last few months.
Energy minister Samuel Undenge last week said the country uses “a unique” pricing model that is different from other countries and does not react quickly to fluctuations in global oil prices.

“Comparing fuel prices in Zimbabwe with those obtaining in other countries will produce different results because we do not use the same fuel pricing models,” he said in a paper presented to Parliament last week.

Fuel prices in the country are set through a fuel pricing model agreed to between the Energy ministry, Zimbabwe Energy Regulatory Authority and oil companies.

The model sets the maximum pump price permissible, after taking into account all the costs of doing business in the fuel sub-sector. The costs include taxes and levies that go to government.

Undenge said fuel prices comparison would only be useful if the Zimbabwean pricing model was similar to the pricing models of other regional countries.

This comes as oil prices on the international market have declined from $123 per barrel in August 2014 to less than $30 per barrel last week resulting in regional countries such as South Africa and Zambia slashing their petrol prices from an average of $1,40 per litre to less than $0,75 per litre.

But in Zimbabwe, petrol is retailing at an average of $1,28 per litre while diesel is going for an average of $1,05 per litre.

This has prompted a number of motorists to voice their concerns over government’s failure to ensure that they enjoy low fuel prices, which have a multiplier effect of lowering consumer goods in the country.

Undenge, however, conceded that some fixed cost elements in Zimbabwe’s pricing model and government taxes were making local fuel prices among the highest in the world.

“The current maximum pump price for diesel is $1,05 per litre. If we take out the government charges and pumping fees per litre, we remain with 58,8 cents.

“This 58,8 cents covers the ex-Beira purchase price, storage and handling, internal distribution and the margins for the oil companies and the dealers,” he said.

The Energy minister also noted that taking out the government charges and pumping fees from the current price of petrol leaves 63,7 cents for the remainder of the cost elements on the pricing model.

“Even if we were to be given fuel for free, given the costs of pumping it into the country, the duties and taxes, storage fees, distribution costs, the pump price of petrol would be 86 cents per litre and that of diesel would be 71 cents per litre.

“This helps to demonstrate that although local fuel prices respond to movements in the crude oil prices, there is a limit to the extent to such response,” he added. – Daily News

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