It is not even a week yet since the previous fuel price hike. Once again, the price of fuel has gone up – as anticipated. This is all happening due to the tensions between Russia and Ukraine. You might be wondering why exactly that war is leading to fuel price hikes globally, right? In this article, I am looking at the latest fuel price hike. Then I am going to break down as simply as possible why the price of fuel is perpetually rising.
Latest Fuel Price Hike
ZERA has once again announced a fuel price hike as follows:
I need to emphasise here that ZERA always underscores that these are price caps. That means operators may sell the fuel below (not above) these prescribed prices depending on their trading advantages. As it turns out, some are no longer adhering to this. Just on the day, this fuel price was announced I heard someone saying they bought petrol for US$1.90 at a certain fuel station. This is illegal and if you happen to come across such shenanigans you must report to ZERA (Call: +263242780010, 253461, or 799979; WhatsApp: +263772161966).
At A Glance – Past Few Days
US Dollar Prices
ZWL Dollar Prices
Breaking Down How Fuel Price Is Determined In Zimbabwe
This is something many of you might be curious to know. The fuel prices are not just randomly determined; there are several factors considered. Just to give you an idea of how these latest fuel prices were determined, here is the breakdown as published by Newzwire:
|Diesel 50||Blend (E0)|
|Total Landed Cost||1.0320||1.0225|
|TAXES & LEVIES|
|Total taxes & levies||0.447||0.447|
|Total administrative costs||0.0210||0.0210|
|Total product cost (Msasa)||1.500||1.491|
|Total distribution costs||0.035||0.035|
|Oil Company Margin||0.0650||0.0650|
|Oil Company Proceeds||1.6000||1.5905|
|Final Pump Price||1.6750||1.6655|
|Rounded-off US$ price per litre||1.68||1.67|
|Exchange Rate (ZWL: US$)||130.157||130.157|
|ZWL price per litre||218.01||216.78|
Breaking Down Why The Russia-Ukraine War Is Affecting Fuel Prices
I thought it necessary to look at this a bit more in-depth but in simpler terms. As with any commodity, the principles of supply and demand apply. The same applies to crude oil prices which has a bearing on fuel since it comes from crude oil. When the demand is high (with relatively low supply), the price goes up and when the demand is low (relatively high supply), the price goes down. Bear in mind that roughly 43 percent of fuel cost is influenced by oil cost. (The other costs stem from distribution, taxes, and so on – you probably saw that from the table above). This simply shows you that if oil cost rises, then so does fuel cost.
Let us go back to the supply and demand element. Fuel prices are going up which means demand is high and supply is comparatively low. Why is supply low? Russia is the world’s largest exporter of oil to global markets. Due to the conflict and a series of sanctions against Russia plus other variables, the oil supply from Russia has been delayed or disrupted. In addition, those economies which can look to buy up as much oil at current prices as prices are expected to rise in future. So that answers your questions on why the fuel prices keep going up. Several other factors do come into the mix e.g. economic and political speculations.
So those are the basic overviews of how fuel price is determined. Plus at least you now know why fuel prices are going up and might continue to do so if the Russia-Ukraine war rages on. One cardinal takeaway from all this you must now appreciate more is how connected the world is.
Total taxes is simply high, 0.447/1.68 that’s 26….%
Also FOB price why does it seem to be that high. In Mozambique fuel pump price is around 0.98 are u telling us that we are buying our fuel from Mozambique at pump price,
If that is so y can’t we look elsewhere, it is reported that Angola sell their fuel at 0.43 pump price
Also why is it Zambian fuel is cheaper than ours yet they’re reported to be taking it from Msasa after putting all those parameters, etc