Zimbabwe fuel price drops, but…..

There is a little relief for motorists as the Zimbabwe Energy Regulatory Authority (ZERA) announced a reduction in the prices of petrol and diesel effective 2 September 2019 which is a contrasting development to what has become a series of weekly fuel price hikes.

The price of petrol dropped from $10.01 to $9.86 while diesel dropped from $10.32 to $10.25.

According to ZERA, the changes in the fuel prices are due to FOB price movements and the revised duty regime.

Fuel prices have recorded regular increase since January while shortages persisted, adding to frustrations among motorists.

Although the latest reduction in fuel prices somehow offers some respite for motorists who are also facing rising costs of living as inflation skyrockets, odds are the decrease is going to be short-lived considering other variables besides FOB price movements.

In addition to FOB price movement, the pricing of fuel is also determined by other factors among them the US$/Zimbabwe dollar exchange rate and the recently introduced pricing model factoring in delivering distance which has seen places like Victoria Falls, Hwange, Plumtree and Bulawayo recording the most expensive fuel prices in the country.

The new price this week is a Harare price and other regional prices may also come off by proportionate margins, but largely remain up.

ZERA has used the exchange rate of $8.50 to US$1 which is way short of the interbank market rate offering $10.71 for the US dollar.

This raises expectations that fuel prices will keep going up than otherwise as government is on record seeking to set the price of fuel at a local currency price equivalent or close to US$1.

With the local currency showing no signs of gaining value against other foreign currencies particularly the US$, it is unlikely that there’s going to be a sustained decrease in the value of goods and services pegged in Zimbabwe dollars, thus fuel prices will go up again.- Equity Axis

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