Home » Industry » ’Fall in Global Oil Prices Unlikely to Bring Much Relief’

ZIMBABWE will not “meaningfully” benefit from the sharp decline in global oil prices compared to other regional countries due to the high overheads incurred by local fuel companies.

Global oil prices have been declining since June last year from around $115 per barrel (a barrel of oil is approximately 159 litres) to a low of $48 per barrel.

It is expected that the price of oil will remain depressed as the biggest group in the industry, OPEC, has decided not to cut production. Despite the sharp decline in oil prices, local retailers were reluctant to lower prices in line with declining global oil prices.

This prompted the Government, through the Ministry of Energy and Power Development to direct fuel dealers to reduce fuel prices by at least 20 cents a litre to a maximum of $1,44 per litre of petrol and $1,32 for diesel. Consequently, the Government evoked Statutory Instrument Number 4 of 2015 adjusting excise duty on petrol and diesel from $0,35 to $0,45 per litre and from $0,30 to $0,40 respectively.

Sakunda chief executive Mr Kudakwashe Tagwirei said there was stiff competition in the industry which has helped to “sort of” stabilise the prices, but this was affecting the viability. He said the viable retail price for petrol could have reached $1,66 per litre in July last year but prices remained in the range of $1,48 and $1,55.

Similarly, diesel prices would have reached $1,50 in July last year. “We are not making money as people might think because of high fixed costs of operations,” said Mr Tagwirei.

“Cost of labour in Zimbabwe is very high and 50 percent of all costs, which are local, are in US dollars as compared to other countries in the region which use their own currency.”

He said price disparities between small and big oil companies resulted from differences in costs incurred. Mr Tagwirei said big companies have huge overheads whereas smaller ones incur little costs.

Finance and Economic Development Minister Patrick Chinamasa said last week the country could save about $180 million on fuel imports this year largely due to lower oil prices.

Source : The Herald