Transport costs drive fuel prices outside Harare

Fuel dealers outside Harare that are selling the commodity at above government-stipulated prices say they are doing so to cover transportation costs for the fuel to towns outside the capital.

A survey recently carried out in Bulawayo, Masvingo and Gweru by Standardbusiness established that service stations in these outlying areas were selling fuel for as high as $1,47 and $1,33 per litre for petrol and diesel respectively.

As of Monday last week, the stipulated fuel prices rose by a cent for petrol and diesel to $1,42 and $1,29 respectively.

According to a prominent fuel dealer who did not want to be named, the reason behind the high fuel prices outside Harare had to do with the cost of transport of fuel.

"It is purely a transport differential. You get your products into Zimbabwe through the pipeline to Harare, so to get it to Bulawayo you have to transport it by road, or occasionally rail and that transportation is not free of charge," he said.

Speaking on the difference between official prices and theirs, he said: "the Zimbabwe Energy Regulatory Authority [Zera] knows that those (stipulated) prices are for Harare. It is from the pipeline into Harare and movement from Harare to other parts of the country will affect the price. How do you transport fuel to Bulawayo? It is a cost. How can that price be the same for the whole country, honestly?"

Fuel operators could be making use of a provision in the Petroleum Act [Chapter 13:22] Act 11/2006, under section 54 concerning "petroleum product prices" wherein Zera shall:

"After consultation with the minister, prescribe the price of any petroleum product. When prescribing the price of a petroleum product, the authority shall take into consideration the cost build-ups of petroleum products."

By taking "into consideration the cost build-ups of petroleum products", this includes the transportation of fuel from one place to another.

In the first quarter of the year, Zera licensed 308 fuel stations across the country.

A source at a service station in Bulawayo concurred that the high price of fuel outside the capital was influenced by transport costs even for some fuel that was imported from nearby Botswana.

"Some of these service stations order good quality fuel from Botswana and it is obvious that such fuel will have gobbled up huge sums in transport, hence the pricing here is affected," he said.

Still in Bulwayo, another source at a service station that was selling fuel at $1,47 and $1,34 per litre for petrol and diesel, respectively, said price variations were due to different fuel quality.

"Those that sell fuel at a higher price will be selling high quality fuel and its costs are affected by the amount associated with its importation. It's either the service stations abandon importing such kind of fuel and import the poor quality if they are forced to reduce prices to stipulated levels, or they continue to order high quality fuel and sell it at relatively higher prices which will make economic sense to dealers," they said.

The quality of fuel, however, is governed by petroleum quality regulations in Statutory Instrument 23 of 2013 which entails that fuel is brought into the country as prescribed in the instrument.

But, when government resumes ethanol blending, that is when the issue of quality may be a factor as the maximum allowable blending ratio at law is up to E20 (20% ethanol and 80% petrol).

In emailed responses to Standardbusiness on Tuesday, Zera CEO Gloria Magombo said the authority was not aware of the varied fuel prices as the stipulated prices applied to all the over 308 licensed fuel stations in the country.

"The maximum pump prices for fuel this week are $1,42 for petrol and $1,29 for diesel. Please advise us which service stations and in which parts of the country (are charging differently). It is important to allow Zera to carry out price surveillance and compliance checks. It is key to assist the authority to fulfil its mandate," she said.

"Also note that Zera has opened offices in Mutare and are also setting up an office in Bulawayo. These offices will assist in responding to complaints, carrying out compliance checks and investigations on price irregularities."

Fuel prices have been rising steadily even though Zimbabwe already is the most expensive country in the region in terms of fuel. In South Africa the price of petrol is averaging $1,19 while diesel stands at $1,07 per litre, while in Zambia the price of petrol and diesel per litre has been averaging $1,38 and $1,20, respectively.
In Malawi, prices have remained at $1,14 and $1,13 for petrol and diesel, respectively.

The fuel cost build-up in Zimbabwe includes free on board (FOB) charges, freight, duty, Zinara road levy, carbon tax, debt redemption, strategic reserve levy and storage. Other factors are handling, clearing agency fees, financing cost, inland bridging cost, storage and secondary transport costs.

The higher the price of crude oil internationally, which has been driving the pump prices worldwide, the higher the price of each of these charges, especially the FOB. On Friday, the price of brent crude was $77,79 per barrel.

Analysts say the reluctance by government to deal with fuel prices is due to the fact that government benefits from the increments due to the high fuel cost build-up.