Government has revised the country’s fuel pricing model to place it on the same level with regional standards and halt gross overcharging of petroleum products by some unscrupulous dealers. According to the new regulations, applicable profit margins for fuel wholesale and retail are now $0.06 (six cents) per litre, instead of the current seven percent, which unnecessarily varies margins for operators when external factors change.
This has seen the price of petrol falling to between $1,22 and $1,33 per litre, while diesel is costing between $1,07 and $1.18 per litre, bringing huge relief to consumers. Since last year, global oil prices have been taking a nosedive due to excess supply on the world market. Since June last year, international crude oil prices have been falling from $90 per barrel to as low as $46,93 yesterday. A barrel has 159 litres of fuel.
Government issued Statutory Instrument 100 of 2015 titled “Petroleum (Fuels Pricing) (Amendment) Regulations 2015 (No. 2), in the Government Gazette yesterday to enforce the price reduction. “The price at which a petroleum company sells any petroleum product shall not exceed the oil company purchase price plus six United States cents (US$0, 06) per litre of the oil company purchase price,” reads the SI in part.
“The price at which a retail outlet sells any petroleum products shall not be more or less than six United States cents ($0,06) per litre of the oil company’s selling price per litre of that product.” Zimbabwe relies on imports and fuel prices are determined through a Government-approved model that takes into cognisance various cost elements with wholesalers and retailers alike restricted to pegging their prices at a margin of not more than seven percent.
But the local oil companies have been overcharging petroleum products despite glaring price changes on the global market. This prompted Government to intervene to protect the public.
Government, through the Zimbabwe Energy Regulatory Authority, hired a consultant to come up with a pricing formula for the sector. Zera chief executive Engineer Gloria Magombo recently told The Sunday Mail that the price of diesel and petrol would come down by five cents and seven cents respectively.
She said other adjustments due to ongoing changes in the international fuel price would be factored in accordingly as they occur. Zimbabwe Energy Council executive director Mr Panganayi Sithole, welcomed the Government move saying it was in the best interest of the nation as fuel was one of the cost drivers. He said the price of fuel on the global market had been coming down, but this had not been translated at local levels.
“If you recall the Government a couple of months ago has been asking petroleum companies to reduce their prices in accordance with what is happening on the international market, but they did not play the ball,” said Mr Sithole. “Government was left with no option apart from introducing a statutory instrument, which now guides the pricing and profit margins petroleum companies have to benefit from.”
Mr Sithole said had the companies played their party, it was not necessary for Government to intervene with a legal instrument. “So the government has acted in the best interest of the nation by curtailing profiteering by these petroleum companies.”