Govt timely levy intervention keeps fuel prices in check

30 Jun, 2022 - 00:06 0 Views
Govt timely levy intervention keeps fuel prices in check Minister of Finance and Economic Development Mthuli Ncube

The Herald

Oliver Kazunga Senior Business Reporter

THE complete removal of levy on diesel and its significant reduction on petrol has kept fuel prices, under pressure from supply disruptions due to the war in Ukraine, in check and without the timely intervention the price of fuel would have breached the US$2/litre threshold, an official said.

THE Zimbabwe Energy Regulatory Authority (Zera) recently adjusted the price of fuel in tandem with the reduction in fuel levy, Zera chief executive officer Eddington Mazambani said yesterday, helping keep the lead on potential significant price hikes.

Early this week, Finance and Economic Development Minister Professor Mthuli Ncube announced during a press conference in Harare on measures to stabilise local currency and contain inflation that the Government decided to review downward fuel levies as well as releasing fuel from the Strategic Fuel Reserve.

While announcing the latest measures, Prof Ncube said over the past few months following significant pressure on global fuel prices due to the tensions in Eastern Europe, the Government has been intervening in the fuel sector in order to stabilise fuel prices.

“The actions have included the downward review of Government levies of fuel, and number two the release of fuel from the strategic fuel reserve.

“This week the Government completely removed the levy on diesel or rather brought it to 0 cents and significantly dropped the levy on petrol, it’s now down to 4,7 cents.

“This action prevented the price of fuel from breaching the US$2 per litre mark,” he said.

Last Friday, Zera reviewed the pump price for fuel to US$1,88 a litre for diesel while blended petrol is now pegged at US$1,77 per litre.

In an interview, Mr Mazambani said had it not been for the Government’s intervention, the prices of diesel could have been pegged at US$2,01 per litre while blended petrol could be selling at US$1,84.

In local currency, the pump price for diesel is pegged at $661,73 per litre while that for blended petrol is pegged at $623,16 a litre.

“The price which is existing in the market now has taken into account the measures which were announced by the Minister. Instead of price going at above US$2 a litre for diesel, it’s now selling at US$1,88 and blended petrol is selling US$1,77.

“This is all because of those measures which the Government has announced,” he said.

Since January last year, there has been increases in the FOB (Free On Board) prices for fuel.

FOB is a term in international commercial law specifying at what point respective obligations, costs, and risk involved in the delivery of goods shift from the seller to the buyer under the International commercial terms standard published by the International Chamber of Commerce.

FOB is only used in non-containerized sea freight or inland waterway transport.

The upward movement in the FOB prices for fuel in the international market have of late been exacerbated by the Russia-Ukraine war. The conflict has spurred an increase in energy prices that is rippling around the globe, hurting consumers and pressuring world leaders to ease their pain.

Russian oil normally accounts for about 10 percent of global oil supply. It’s still being traded, but not to the same degree due to western sanctions over Russia’s war in Ukraine, so the world has a gap in supply.

On account of the two warring countries being the world’s largest suppliers of fuel, accounting for a third of the global supplies, supply was at the moment limited triggering inflationary pressures across the world.

On its part, the Government has implemented a number of measures with a view to curtail the price of fuel from continuing on an upward spiral trajectory.

Asked about how sustainable will the fuel prices be kept below the US$2 mark, Mr Mazambani said: “Regarding the sustainability of those prices it is dependent on how the Government is going to keep subsidising the fuel. But the price of fuel on the international market is determined by the FOB price.”

An economic commentator Ms Sharon Mpofu said while the Government should be commended for implementing measures that curtail fuel prices from increasing, it remains to be seen how long the impact of the interventions will be sustainable.

“It is quite commendable that the Government has put a dent on fuel price increases but the question remains how sustainable the move is given the Russia-Ukraine conflict which has disrupted the global supply chain.

“Therefore, what is critical now is to ensure that the Government continues to beef up stocks in its strategic fuel reserve, so that the country does not run out of fuel and that the market continues to be supplied with subsidized fuel,” she said.

Fuel is one of the major cost drivers that have also propelled Zimbabwe’s attendant annual inflation to rise to 191,6 percent this month from 131,7 percent in May.

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