The price of fuel is set to go up following recommendations by a consultant that retail fuel operators should get an additional two cents on the profit margin.
BY TATIRA ZWINOIRA
The Zimbabwe Energy Regulatory Authority’s (Zera) stipulated retail fuel operator profit margin is $0,06.
As of yesterday, the prices of petrol and diesel were at an average of $1,33 and $1,18 per litre respectively, according to consultants Genesis Analytics hired by Zera to do an analysis of fuel pricing.
If the recommendation is taken on board, the price of fuel would rise to $1,35 and $1,20 per litre for petrol and diesel respectively a situation that would trigger a general increase in prices in the economy.
Addressing guests at the Petroleum Sector Pricing Study Stakeholder Workshop yesterday in Harare, Genesis Analytics representative in charge of the study Ethel Teljeur said part of the problem was a lag in the free on board cost to the final pump price.
“…the only model we found can work here is a fixed price setup to offshoot the lag in time it takes between FOB and the actual pump price,” Teljeur said.
The study found there was an average two week’s delay in considering changes to the free on board cost on the international market to the final pump price.
Genesis Analytics found the country’s fuel cost build up to be the most expensive in the region, which forced retail fuel operators to operate at low profit margins.
In comparative countries, Tanzania’s retail fuel profit margin is about the same as in Zimbabwe, Zambia is 4% per litre of petroleum, Namibia (9%), and South Africa (12%).
The difference between these countries and Zimbabwe is that they are able to subsidise, unlike in the country which depends a lot more on petroleum as a major revenue contributor.
Taxes and levies take up $0,461 and $0,632 for diesel and petrol respectively. With the country consuming 4 million litres a day, according to estimates, government makes an estimated $2,18 million per day.
However, permanent secretary in the Energy and Power Development secretary Patson Mbiriri said during the data collection exercise, some of the stakeholders had inflated the data hoping to influence results of the study in their favour.
In September 2015, Genesis Analytics undertook the study which ended last week of October this year. The study was supposed to investigate why Zimbabwe has the most expensive fuel prices in the region, despite a fall in the global price of crude oil.
In the first round of the study, only 39 responded out of 491 licensed fuel retailers. In the second round, 184 licensees out of the 491 participated.
In total, only 45 licensees out of 491 provided usable information, Teljeur said.
“This means we had a sample size of less than 10% and that might be okay if the selection process had been followed in finding these respondents. This is why we really want to make it very clear that the findings are not very definitive at this stage,” she said.
Consumer Council of Zimbabwe deputy executive director Rosemary Mpofu said consumers could not afford any fuel hike and that Zera had to stamp its authority as fuel operators were using the high fuel cost build up to take advantage of consumers.