Why Zimbabwe cannot end fuel shortages

Zimbabwe has been battling to end fuel queues for more than a year now but fuel shortages persist and unless the government reins in the black market it will never solve the problem.

Fuel in Zimbabwe remains the second cheapest in the region despite the fact that it has been going up every week and there were riots in January which resulted in several deaths when the price of fuel went up by 150 percent.

The only country with cheaper fuel than Zimbabwe, according to Wheels24, is Angola which is one of the major oil producers in Africa.

The main problem is the exchange rate.

The Zimbabwe Energy Regulatory Authority this week increased the price of petrol to a maximum of $11.76 a litre and that for diesel to $12.42 a litre.

ZERA used an exchange rate of 9.5 which means that the petrol price should be US$1.23.

The reality is that the price of petrol is 65 US cents as the exchange rate is 18:1 on the black market. Even using the official interbank rate, the price goes up to 77 cents a litre.

Unless Zimbabwean businesses stop conversions and look at prices in their own currency, the shortage of fuel will continue to persist as doing business will not make any sense.

Service stations that sell fuel in US dollars are selling it for, on average, US$1.25 a litre, which is close to the current price if the exchange rate of 9.5 was right.

Below is a comparison of prices for 10 August 2019

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