HomeBusinessFuel costs trigger price increases

Fuel costs trigger price increases

Paul Nyakazeya

FUEL prices in Zimbabwe have shot up by between 10% and 16% since December 21, 2010 after stocks dropped drastically and demand rose significantly in European countries due to the onset of the winter season.

Fuel dealers in Zimbabwe cited the sudden increase in international crude oil prices and increased demand over the festive period for the price increase. The price of Brent crude has averaged US$95 in that period, pushing the price of fuel up.
As of Tuesday the price of diesel had risen from US$1,15 per litre in December to between US$1,30 and US$1,40 per litre while petrol was selling at between US$1,40 and US$1,49 from US1,25 per litre during the same period.
The latest round of fuel price increases has triggered a widespread surge in the cost of basic commodities and consumer goods.
Economist David Mupamhadzi said developments on the international oil markets have not been favourable for fuel importing countries like Zimbabwe.
“The spike in the oil prices directly affects the price of fuel and hence the recent increases in the fuel price. Domestic factors also played a part in pushing the price of fuel in Zimbabwe, especially the high structural cost of landing fuel in Zimbabwe,” Mupamhadzi said.
He said the surge in the prices of fuel was a worrying development, especially for an economy like Zimbabwe which was at a delicate stage of recovery.
“Continued fuel increases could imperil a fragile economic recovery. Ordinary citizens will also be hard hit by the price increases, a situation which will worsen the welfare of people,” he said.
The price of two litres of cooking oil rose from US$3 in December to US$4,30 during the first week of January, blue bar washing soap rose from US$1 to US$1,40 during the same period while a one kg of economy beef rose to US$5 from US$4,50.
Surf 500g now cost US$1,86 from US$1,50, Mazoe two litres rose from US$2,75 to US$3,00 while two kgs of Rice (Mahatma) rose to US$2,85 from US$2,50.
Economic consultant Sonny Mabheju said the fact that Zimbabwe was a fuel importer meant that it was vulnerable to the vagaries of global economics.
“We are vulnerable to volatilities in these factors over which we have no control. If the fuel price increases get sustained over a long period, they will end up influencing the price of goods and services upwards,” Mabheju said.
According to the international media there is always a high demand for oil during mid- December to February in European markets as they experience freezing conditions, increasing the demand for energy.
Eric Bloch, a local economic commentator, noted that the increase in demand for fuel in Europe was primarily due to the unusually cold climatic conditions in most northern hemisphere countries, creating considerably higher demand for oil.
“The rise was also partially due to increasing demand as global economies slowly recover from the 2008/2009 recession and also to some diminution in production by BP in the Gulf of Mexico and some oil-producing countries recently impacted upon by floods.”
Bloch also said the extent of impact upon prices and hence upon the inflation rate will be contingent upon how soon the global demand for crude oil declines.
“The extent will also be determined by the extent crude oil production increases, but currently it is probable that the extent of commodity and service price increases and of rises in public transport fares will occasion at least a 3% additional rise in the 2011 annual inflation rate, with a resultant of that rate potentially being as great as 7%,” Bloch said.

Recent Posts

Stories you will enjoy

Recommended reading