Government has reduced petrol and diesel prices by seven and five US cents respectively, as it continues working on economic variables that directly affect competitiveness.
A Statutory Instrument is likely to be issued this week to enforce the price reduction, which leaves a litre of petrol at a minimum US$1,28 and diesel at US$1,15. Since early 2015, global oil prices have been declining on the back of an oversupply of the product. In January, a barrel of crude oil cost US$47,22, further declining to US$45,71 yesterday.
However, local fuel retailers had not factored this into their pricing structures; and even when they did over the past two weeks, petrol sold at US$1,35-US$1,43 and diesel for between US$1,18 and US$1,30. Energy and Power Development Minister Dr Samuel Undenge told The Sunday Mail that Government had resolved to intervene to protect the public.
The Zimbabwe Energy Regulatory Authority, he said, had hired a consultant to come up with a pricing formula for the sector.
“Applicable margins for fuel wholesale and retail are now going to be an absolute 6c/litre instead of the current seven percent, which unnecessarily varies margins for operators when external factors change. We do not expect the oil industry to hold the economy to ransom and more importantly, as Government, we don’t want to be pushed into a position where we have to take drastic action. It would not be good for business.
There is no need to read the riot act to the fuel industry. Government wants them to make a profit, not profiteer. We have commissioned a study to streamline the fuel model, which is provided for in SI80 of 2014.”
Zera chief executive Engineer Gloria Magombo said: “In terms of the pronouncement made by the minister, the price of diesel and petrol is to come down by five cents and seven cents, respectively.
“Other adjustments due to ongoing changes in the international fuel price will be factored in accordingly as they occur.”
Petro-Trade acting chief executive Mr Godfrey Ncube said: “As Government pushes to reduce the cost of production, I think the price reduction will benefit industry and motorists. I am sure it will have a downward impact on prices.”
Economist Mr Chris Mugaga was, however, skeptical. “The price reduction is marginal when looked at from the potential pass-through effect in influencing prices of goods and services in the economy.” Another economic analyst, Mr Witness Chinyama, weighed in saying: “That’s positive news. It will contain the cost of production; our industries need that. I hope it will be sustained as fuel plays a critical role in pushing the cost of production either negatively or positively.”
Consumer Council of Zimbabwe director Ms Rosemary Siyachitema chipped in, “It’s always good news for consumers when prices are reduced. We hope the reduction will also be shown in shops.”