Fuel Prices Drive Commodity Prices up

FUEL prices in Zimbabwe have increased by 50% inside a month as the state-run National Oil Company of Zimbabwe (Noczim) fails to procure enough fuel to meet the country’s requirements.

Fuel prices, which have been on an uninterrupted increase in the last three months, have resulted in the prices of basic commodities increasing by an average of US$0,90 since May depending on the retail outlet.

According to the Consumer Council of Zimbabwe the family basket has been increasing over the past three months in response to fuel prices.
The price of petrol rose from US$1 on June 16 to US$1,50 last week, while the price of diesel rose to US$1,10 from US$0,90. The price of fuel is however fluctuating between US$1,40 and US$1,60 depending on supplies on the day.
According to the Reserve Bank, Zimbabwe needs between 100 and 120 million litres of fuel a month. Zimbabwe consumes about 1,2-million litres of fuel (diesel and petrol) a day. Currently the country is only importing 40 to 50 million litres.
The strengthening of the rand against the US dollar is also said to have exacerbated the shortage for small-budget fuel importers.
Zimbabwe’s fuel importers prefer doing business in US dollars, which are now fetching less. Yesterday the rand was trading at 8,193 to the dollar. Most Zimbabweans are still transacting the two currencies at 1:10.
Economists this week blamed the massive tax on imported fuel as a contributing factor.
Government has set excise duty on petrol and diesel at US$0,20c per litre. Noczim is said to be charging them as much as US$0,58c for petrol and US$0,22c for a litre of diesel.
Government is however saying the increase is in response to rising global
And as a means of raising hard currency, fuel importers are said to be insisting on trading in coupons rather than cash.
Global oil prices have remained depressed with a barrel of oil trading at an average of US$60 and is seen remaining below US$90 per barrel by end of year
The coupon system is favoured by suppliers because it forces consumers to pay in advance. Rising fuel costs have immediately translated into higher transport and food prices.
Though shops are well stocked, the price of goods is rising, with many unable to afford to buy enough food.
Economist Eddie Cross said when Zimbabwe converted to the use of foreign currency for all domestic transactions, the import fuel system was liberalised and price controls lifted.
“This resulted in an immediate resumption of normal supplies and in a few weeks all informal fuel sales were suspended,” Cross said.
In the past three months restrictions have again been imposed on import permits resulting in a resumption of the effective monopoly over fuel supplies going back to Noczim.
However, because Noczim allegedly has no credibility in international or even regional markets, its transactions have to be in hard cash.
According to Cross the temptation of many millions of dollars (about US$1,5 million a day) flowing through the accounts of Noczim was just too much for the elements in government and Noczim resulting in a large sums of money being taken out of the Noczim accounts. The parastatal as a result failed to deliver millions of litres of fuel, already paid for to local clients.
“These clients then halted payments to Noczim and had to try and fill the resulting void with supplies from South Africa by road,” said Cross.
No comment could be obtained from Noczim at the time of going to print.
Energy Minister Elias Mudzuri is on record saying the current fuel shortages are as a result of problems being experienced by Noczim. “Noczim is not procuring enough fuel as they are experiencing problems,” Mudzuri said.