THE price of fuel is expected to skyrocket next week following a surge in international petroleum prices a fortnight ago.
Oil prices went up sharply over the past two weeks to hit US$41 a barrel of crude oil from a record low of US$28 per barrel recorded in January this year.
The price of crude oil had been on a freefall since June 2014 after touching a record high of US$118 per barrel before receding to US$28 per barrel early this year.
Currently, the pump price of petrol is between US$1,20 and US$1,24 per litre while diesel is selling at between US$0,92 and US$1,04 per litre.
Local petroleum prices are still far higher than those in other countries in the region.
The impending fuel price increases are certainly going to have a detrimental impact on the frail economy, as prices of other commodities might rise as businesses cushion themselves from high costs.
Zimbabwe Energy Regulatory Authority (ZERA) chief executive officer, Gloria Magombo, conceded on Tuesday that the surge in fuel prices on the international market would push local prices northwards.
Magombo said: “We always follow that pattern but we are always behind by two to three weeks. When prices are coming down, we are always behind in adjusting our fuel prices and when (there is an uptick in oil prices) we expect the local market to react accordingly.”
The Organisation of the Petroleum Exporting Countries (OPEC) and non-members are meeting next month in Doha, Qatar to discuss a production freeze.
The effect of this would be to push prices further up. Key cartel members include Libya, Saudi Arabia, Kuwait, Qatar and Algeria. Russia will be at the meeting as a non-member.
OPEC members insist that they want to stabilise the oil market, but in essence, they have been affected by falling international oil prices that have hurt their economies. The low oil prices were a result of oversupply, and not a lack of demand.
Now, the prices have rebounded, although they are still far below record levels that helped boost oil producing countries’ economies.
But non oil-producing countries like Zimbabwe are likely to suffer from the price surge as this would affect the cost of logistics, which would in turn affect commodity prices across the board.
This would have the effect of further derailing economic revival efforts in the country, whose growth has been projected at 1,4 percent this year by the International Monetary Fund.
Local petroleum companies said they would hike prices to maintain profit margins. There were indications they would swiftly raise their retail prices next week, and that talks with ZERA had already begun on the modalities of an adjustment.
It would appear the petroleum companies require no persuasion to adjust prices upwards, unlike in situations when international prices go down. Last year, players were forced by government to reduce their retail prices after they had maintained the price of petrol at US$1,50 per litre and diesel at US$1,38 per litre, despite the downward spiral in international oil prices.
Players said since government had increased the fuel levy when prices went down to protect the flow of revenue into the fiscus, they expected Treasury to reduce the levy once prices started moving up.
But this is unlikely to happen considering that government is desperate for cash due to dwindling revenue streams caused by widespread company closures and job losses.
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