No fuel joy for Zim motorists

via No fuel joy for Zim motorists | The Sunday Mail 31/01/2016 by Harmony Agere

The world oil industry is arguably in its deepest downturn in decades following the sharp decline of crude oil prices in the last 18 months due to a massive supply glut that is overwhelming demand.
Only a year ago, a barrel of crude oil was selling for over $115 but the price has dramatically declined to between $28 and $32 a barrel in recent weeks.
Crude oil is unrefined petroleum which can be processed to produce motor vehicle fuels such as diesel and petrol and a barrel is equal to 159 litres.

Observers say the decline of prices on the international market has forced governments across the world to reduce prices for diesel and petrol in their respective countries.
But while fuel prices are drastically dropping everywhere else, Zimbabweans are concerned as the same is not happening here in Zimbabwe.

Retailers in Zimbabwe continue to sell diesel and petrol at an average of $1,11 and $1,31 per litre respectively.
These prices came into effect in September when a barrel of crude oil was costing about $50.
In other Sadc countries, the average diesel and petrol price per litre is now $0,85 and $0,92 respectively, which is much lower than the local current market prices.

Experts in the energy sector say motorists in Zimbabwe will not benefit from the decline of fuel prices being experienced on the international oil market as the country is using a complicated pricing and regulating model which makes it difficult for the decrease to be immediately felt locally.
While others have attributed the stability in local prices to a tight tax system, there is a consensus within the industry that the regulatory methods are heavily flawed.

Zimbabwe Energy Council, Mr Panganai Sithole, said Government must act fast to come up with a sound regulatory structure tailor-made for the petroleum sector. He said this is not only for the benefit of motorists but for the economy at large as low fuel prices translate to low costs of doing business.
“It is sad that when prices on the international market go up, retailers are quick to hike their prices but they don’t seem to follow the trend when the prices come down,” he argued.

“The reason is that our current pricing and regulatory system is heavily flawed and it needs changes. There are no people with expertise in dealing with petroleum in our current regulatory structure, which means that there are people who have little understanding of what we are talking about. They tend to treat electricity and petroleum issues as the same.”
Mr Sithole said prices on the world market are likely to stay low in the next six months as the United States and Iran are set to produce more oil in the period in question.
“There is no reason why Zimbabweans should not benefit from this, it is a period we should take advantage of and boost our economy because it will one day come to an end,” he said.
“Forecasts show that prices are going to remain low for the next six months because the United States and Iran are producing more than they were producing before.”
A couple of weeks ago, the then Zimbabwe Energy Regulatory Authority (Zera) acting chief executive officer, Eddington Mazambani, told local media that changes in the international market are not being felt in Zimbabwe due to the time spent from processing crude oil to importation.

“Zimbabwe is using the United States dollar, so the fall of the international prices is not immediately felt in the economy due to the lead time between processing crude oil through to the actual procuring and receiving of products in the country,” he said.
“Zera commissioned the Petroleum Sector Pricing Study to review and update the current pricing models.”
According to Mazambani, the present pricing model was based on free on board (FOB), Government levies and taxes, storage and handling plus margins for wholesalers and retailers summarised in Statutory Instrument (SI) 80 of 2014 which has been updated with SI 20 and 100 of 2015.
Zimbabwe National Chamber of Commerce chief executive officer, Mr Christopher Mugaga, said the prices may not come down immediately due to heavy tax.
“It is taxation. Government has very limited fiscal space so it is relying on levying fuel importers to get revenue. So with heavy taxation, there can only be little space for the prices to drop.”

Therefore, experts have called for flexible tax fees and laws to enable the country to benefit. The Consumer Council of Zimbabwe (CCZ) is, however, of the view that fuel prices have been declining constantly since January last year.
CCZ deputy executive director, Rosemary Mpofu, said studies carried out by her organisation countrywide show that prices have been going down, although at a slower rate when compared to others in the region. Mrs Mpofu backed her argument with survey results which showed that while diesel and petrol sold for $1,32 and US$1,43 respectively in January 2015, most retailers have been selling the products for $1,11 and $1,31 this year. Observers say the oil industry is in its deepest downturn since the 90s as prices have dropped to an all-time low.
This has been attributed to the increased production of oil in the Iran and the United States. The US used to consume much of the oil produced in the world.

Supplies have resultantly flooded the markets, thereby leading to the decline in prices. There are discussions between countries that produce oil to cut back on production so that prices can increase. However, there is no consensus yet.
Efforts to get a comment from the Minister of Energy and Power Development, Dr Samuel, were fruitless as his mobile phone went unanswered last week.
E-mailed questions that were sent to Zera had not been responded to by the time of going to print.