A Review of the Nigerian Energy Industry

Global fuel prices fall, but not in Zimbabwe

17 December 2014, Harare – The country’s energy regulator has blamed the government’s “fuel pricing template” and hunger for tax dollars as local motorists demand answers on why they have not benefited from the plunge in global oil prices.

Wholesale fuel prices on the global market have fallen by a quarter and motorists in other countries including neighbouring South Africa and Zambia have seen pump prices coming down as well, but not in Zimbabwe.

Oil price fallIn an interview Tuesday, Zimbabwe Regulatory Authority (ZERA) chief executive Gloria Magombo blamed the template government uses to determine the price build-up of fuel as well as the administration’s hunger for tax dollars.

She said, unlike other countries in the region, taxes are the major source of income for the local government and reducing prices would hit tax revenues for treasury.

“The South African government, for instance, does not only rely on taxes for survival compared to our own government,” the ZERA boss said.

“Taxes that are the major source of revenue for the government. That is why fuel prices continue to go up because the government is desperate for money in an ailing economy.”

Explaining the rigid “fuel pricing template” Magombo said: “The first important point of fuel pricing is the free-on-board;

“The next level taxes, duties and transport cost from Beira right up to Msasa fuel depot.

“The cost of transportation is about 5.7c, then we add duty which is about 35c and then other levies such as carbon tax, ZINARA levy, strategic stock reserves, debt redemption levies.

“These will all add up to about 50c. Then you add the cost of transportation from Msasa to the fuel depots and, from there, to the retail sites.”

Local motorists continue to pay between 1.50c and 1.56c for a litre of petrol and 1.41c and 1.44c for diesel.

Magombo however, said prices were beginning to come down, adding the impact of lower wholesale prices would be felt next year as new stocks come into the country.

“As I speak, the prices of fuel has been going from 150c since November,” she said.

“But as a regulator we are not just sitting down (and doing nothing). We are monitoring with other consumer groups to ensure that oil companies adhere to the Statutory Instrument 80 of 2014.

“If they don’t conform to that a penalty will be imposed on them. This can even lead to loss of license if one is not adhering to rules and regulations.”

The ZERA boss also urged motorists to shop around for lower prices as there are many players in the industry.

“We are pushing for regulations that all prices should be displayed so that motorists can easily compare prices and drive past those retailers who do not reduce prices.”

Analysts say high oil prices over the last decade forced countries such as the United States and Canada to expand local production while weakening economies reduced demand in Europe.

The result was that this year oil supply outstripped demand and, by September, prices started falling.

Big producers in the OPEC group chose not to cut supply and prop up prices with countries such as Saudi Arabia not keen to lose their market share which resulted in the free-fall continuing.



– NewZimbabwe.com

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