Zimbabwe’s push to use cleaner and environmentally-friendly diesel will see motorists forking out a lot more for the liquid, whose price might rival that of petrol.
BY TATIRA ZWINOIRA
Last year, government said it would phase out diesel 500 in favour of diesel 50 with effect from May 1 this year.
The concern of high prices comes as the price of diesel 50 has come close to that of petrol.
In e-mailed responses to Standardbusiness on Tuesday, the Zimbabwe Energy Regulatory Authority (Zera) acting CEO Edington Mazambani said diesel 50 was made more expensive by the method the fuel was transported into the country.
“The diesel 50 which is in the market is transported using the more expensive mode of transport, which is by road. Previously it could be transported by pipeline. Its price will come down once oil companies start picking up diesel 50 from Noic [National Oil Infrastructure Company] depots through the pipeline,” he said.
“Measures have already been put in place to start pumping diesel 50 using the pipeline and this will have immediate effect on the price once all stocks of diesel 500 are used up.”
He said that diesel 500 in stock at the time of banning would still be supplied into the market until all the stocks are exhausted.
“Diesel 500 is therefore still selling at the much lower price compared to the diesel 50 whose price is almost equal to the price of blend. Once all the diesel 500 stocks have been exhausted, oil companies will start distributing diesel 50 transported through the pipeline from the Noic depots to the market. with effect from May 1 2018, no diesel 500 will be sold in Zimbabwe,” he said.
“At that point, the price of diesel 50 will go down by about 12c/litre as it will no longer be transported by road which made it expensive.”
Currently, the price of diesel 50 is averaging $1,39 to $1,40 per litre, the same price as petrol. At places that are still selling diesel 500, it is averaging $1,25 per litre.
In June 2017, diesel 50 was reported to be accounting for about 5,3% of the local market share, a figure which is set to grow further come May 1.
Diesel 50 is preferred globally due to the low sulphur contained in the fuel of 50ppm sulphur, compared to the 500ppm of sulphur in diesel 500.
Lower sulphur diesel contributes to reduced emissions of particulate matter into the atmosphere through the exhaust pipe, thereby protecting the environment.
But, with Zimbabwe’s daily consumption of fuel being four million litres per day, the pricey diesel 50 also means higher revenue stream for government in terms of taxes.
The high fuel prices have always worried motorists considering the country is selling the most expensive fuel in the Sadc region while charging the same as Zambia on diesel.
According to fuel price tracking site that looks at global petrol prices in Sadc countries, the price of diesel per litre in South Africa is $1,15, Zambia ($1,26), Botswana ($0,81), Mozambique ($0,96), Malawi ($1,13), Lesotho (0,77), Madagascar ($0,99), and Mauritius ($1,05).
In Namibia the price is $0,95, Tanzania ($0,91), Angola ($0,73), Democratic Republic of Congo ($1,08) and Swaziland ($1,02).
For petrol, the price per litre in South Africa is $1,13, Zambia ($1,47), Botswana ($0,84), Mozambique ($1,04), Namibia ($0,94), Tanzania ($0,98), Angola ($0,86), Lesotho ($0,78), democratic Republic of Congo ($1,09), Malawi ($1,14), Swaziland ($1,03), Mauritius ($1,34), Madagascar ($1,19) and Lesotho (0,78).
The website did not have prices of fuel for Seychelles.
With Sadc already pushing for the phasing out of diesel 500 in preference of diesel 50 from member states, the difference in the price of diesel in Zimbabwe against member countries is set to go up.
The lower prices in these markets are influenced by the fact that some of the countries are close to the ports, while some have their fuel semi-subsidised.
Others like South Africa have refineries and therefore import crude oil at cheaper prices.
However, in Zimbabwe the pricing structure for fuel is made out of a plethora of charges, making fuel more expensive. These are free on board (FOB), freight, duty, Zinara road levy, carbon tax, debt redemption, strategic reserve levy and storage charges, which are the highest in the region.
Energy and Power Development permanent secretary Partson Mbiriri told a parliamentary portfolio committee last week that a number of taxes had seen local prices higher than those obtaining in the region.
“Our tax regime vis-a-vis fuel is not as kind as it is elsewhere in the region, and when the FOB goes down, that does not change the tariffs we charge on fuel and for that reason, we end up not being competitive,” he said.
So even if diesel 50 starts to be transported via pipeline, as stated by Mazambani, the price per litre of diesel will still be relatively high.
Prices are also high because fuel operators are trying to maintain a profit margin of between six to eight cents, with six being the recommended amount. Besides the mark-up, players also want to account for delays in remitting cash to suppliers due to the central bank preserving cash by having more of it.
Fuel currently chews the chunk of forex in the import bill.
Sources told Standardbusiness that the Motor Industry Association of Zimbabwe (Miaz) met with representatives from the Ministry of Energy on Tuesday to discuss these prices.
The sources said that there were consultative meetings underway with the Energy and Power Development minister Simon Khaya Moyo.
The people involved with the discussions are the ministries of Finance and Reserve Bank of Zimbabwe apart from the ministry of Energy and Power Development.
Miaz president Simplisio Shamba declined to comment on the matter.