Zhemu Soda

THE government yesterday said Zimbabweans must use public transporter, Zupco to escape high fuel prices after announcing another hike and warning of weekly increases.

Yesterday, the Zimbabwe Energy Regulatory Authority (Zera) increased fuel prices for the second time in five days, with petrol going up from US$1,51 per litre to US$1,67 and diesel from US$1,44 per litre to US$1,68.

Addressing the media, Energy minister Soda Zhemu said people should use Zupco buses to travel to work.

“We are all affected, but if we can have the (fuel) those that can afford can always continue to be (driving), but this is a time to make critical decisions, not to be travelling unnecessarily, and we can also maybe use Zupco buses that the government has provided,” Zhemu said.

“Let’s park our vehicles for now, that is an encouragement, yes, because the government has already gone ahead of this situation that we are into currently by providing these buses. Let us make use of the Zupco buses to and from our work stations in the interim while we watch what is happening on the international arena.”

However, Zupco yesterday issued a statement, saying it was unable to provide transport services due to delays in fuel deliveries to its depots.

The estimated vehicle population in the country was 1,4 million as at the first quarter of 2018, according to the latest available statistics.

Zhemu said the Russian invasion of Ukraine was causing global oil prices to rise.

Russia contributes about 12% to global oil supplies.

“The objective is to ensure that oil companies remain viable, which would in turn
ensure that the local market continues to receive adequate fuel supply,” Zhemu said.

“To that end, petroleum process reviews shall be done on a weekly basis to preserve the process of the products in line with the situation obtaining on the international markets.”

“Zimbabwe currently prices fuel on the basis of the M-1 methodology that was adopted in 2019. The methodology uses the average free on board (FOB) price in the preceding month to set the price for the following month, which according to the law mandates a review to be done by the 5th day of the month.

“With the sharp increases in fuel prices on the international market, the use of the M-1 is no longer sustainable, as the resulting FOB prices would lag too much behind and fail to reflect the actual market performance. This would threaten security of fuel supply on the market, with oil companies withholding release of product and suspending fuel imports, as they would not replace traded stocks,” Zhemu said.

Following announcement of fuel price increases yesterday, the parallel market exchange rate reportedly jumped to US$1:$270 from $250, with dealers warning of further fall of the Zimdollar in the coming days.

An increase in the parallel exchange will likely force businesses to raise prices of goods and services, in addition to increases forced by fuel price spikes.

While the price of oil is causing fuel prices to spike globally, in Zimbabwe, they are determined mostly by taxes impose by government.

These include FOB charges, freight, duty, the Zimbabwe National Roads Administration road levy, carbon tax, debt redemption, strategic reserve levy, and storage.

Other charges are handling, clearing agency fees, financing cost, inland bridging cost, storage and handling costs and secondary transport costs.

After all these charges are taken into account, Zera allows fuel operators to put a maximum of six to 10 US cents per litre of fuel.

Energy deputy minister Magna Mudyiwa was grilled in Parliament over the fuel price increases by MPs.

“As a ministry, we are ensuring that the country has enough fuel and we are monitoring the situation,” she said.

Finance deputy minister Clemence Chiduwa said: “We will use a whole government approach to look at all the issues that are part of the pricing models for fuel. The easiest approach is to come up with a raft of subsidies.”

“Right now the budget has no room to manoeuvre we cannot subsidise and it’s something that we have to relook and say  given  the situation that is on the ground what is it that we can do to cushion our  people.”

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