Global oil prices went down almost 50 percent by the end of last month
Golden Sibanda Senior Business Reporter
THE Zimbabwe Energy Council has called for an overhaul of the country’s petroleum industry amid concerns around “the slight decline” in fuel prices despite the sharp fall in global oil prices.
This comes as local fuel retailers have been reluctant to cut prices even though global prices have fallen due to oversupply.
Global oil prices had come down almost 50 percent by the end of last month, but domestic fuel prices have been largely intransigent, coming off less than 10 percent in the period.
ZEC said the price of fuel should come down by as much as 25 percent, taking into account local retailers’ cost structure, Zimbabwe’s land locked nature and its liquidity problems.
ZEC, an affiliate and committee member of the World Energy Council, chief executive Mr Panganayi Sithole yesterday said Zimbabwe’s petroleum industry should be reorganised.
The reservations come as the Zimbabwe Energy Regulatory Authority has come out, seemingly, in defence of retailers’ reluctance to lower the price citing limitless reasons.
ZERA claimed the prices were within limits set in statutory provisions and were monitored on a regular basis. It also said local retailers’ cost base differed from other countries while it took longer for Zimbabwe to benefit from global declines in oil prices.
Ironically, fuel prices go up almost immediately in Zimbabwe when global prices trend northward.
“Zimbabwe’s petroleum industry needs an overhaul. The role of every stakeholder; that is the players, the regulators and the Government, should be revisited,” Mr Sithole said.
He said there was need for intervention by policy makers and regulatory authorities to thwart the cartel-like behaviour exhibited by retailers on prices in defiance of global trends.
Further, he said there was need to constitute an industry body that stakeholders can lobby on critical issues such as pricing, contrary to the prevailing individualistic scenario.
Zambia and South Africa were the first to effect a reduction in retail fuel prices in the region with the South Africans waking up to news of further cuts on pump prices yesterday.
In Zimbabwe, Mr Sithole said, the slight reduction of between 2 cents and 3 cents only came through after fierce debate started around retailers’ unwillingness to cut prices.
Petrol prices have marginally trended down from around $1,54 per litre in November to about $1,51 per litre and diesel about $1,44 per litre to the prevailing average of $1,38 per litre.
The ZEC boss said if left to the whims of the profiteering retailers, the petroleum industry would be run by cartels that will “collude (to fix prices) as what is happening in Zimbabwe”.
“There is need to really look into the pricing mechanism of the petroleum products in Zimbabwe and to make clear the roles of the Government and the regulator in terms of pricing of the products rather than leave that to market forces,” Mr Sithole said.
Government has successfully resolved controversies around pricing thresholds in industries such as telecoms through effective regulation when players charged high prices.
Mr Sithole said other countries, despite allowing market forces to determine prices, made sure players responded to global pricing trends to cushion industries and their economies.
In the UK, ministers warned they would watch oil firms “like hawks” to ensure benefits of lower oil prices were passed on to civilians in terms lower prices, air fares and heating homes.
In contrast, Zimbabwean businesses are known to seize the slightest opportunity available to profiteer beyond reason – a habit carried over from the era of hyperinflation.
Observers queried how the retailers sustained operations around prevailing prices if they could not afford to rationalise them in line with the huge drop in international oil prices.
Prices have lost around 55 percent since their peak above $115 last June as stockpiles of oil mount with no signs of a cut by the Organisation of Petroleum Exporting Countries.
Mr Sithole said retailers’ seemingly irrational reluctance to lower prices in line with the fall of global oil prices should be viewed in the context of its effect on the success of Zim-Asset.