The Zimbabwe Energy Regulatory Authority (ZERA) announced an upward review of fuel prices with diesel prices increasing by US11c (6 percent), hitting $US1,76 per litre while petrol blend increased by US4c to $US1,65 with effect from September 2023.
Prior to the latest increases, the price of diesel was pegged at US$1,65 per litre while petrol blend was at US$1,61 a litre as of August 2023.
According to the energy regulator Liquified Petroleum Gas (LPG) prices for September are pegged at US$1,60 per kilogram.
The fuel price hike has reignited fears of higher energy costs for businesses who rely heavily on generators during power outages which might resultantly drive up the cost of production for businesses.
An analyst, Tafara Mtutu, said “Fuel is a very significant cost in terms of doing business. Almost everything produced in Zimbabwe has a fuel component as part of its costs and when that cost increases, depending on how intensive that business uses fuel, it means that there will be inflationary pressures on some of the products,” he said.
“Countries that produce oil control supply in response to the broader economic environment by managing the price of oil because if they let it slide, it will affect their economies. So if supply remains tight the net result is price increases for fuel,” said Mr Mtutu.
“When oil prices increase obviously a ripple effect is felt in Zimbabwe as seen in the increase of fuel prices.So they are also increasing their prices in response to what is happening on the global landscape.
He said that the immediate expectation is that inflation might start picking up again and reversing its downward trend that has been observed in the past couple of months.
“In the long term businesses might also experience higher operating costs due to the need to use generators for back-up power,” he said.
Oil jumped to its highest price, above US$90 per barrel for the first time this year since last November, after the two oil-rich nations Russia and Saudi Arabia said they would prolong a plan to withhold supplies from the global market until December.
The two countries, according to Reuters, extended their “voluntary supply cuts” for a combined 1,3 million barrels per day.
Confederation of Zimbabwe Industries (CZI) President, Kurai Mathseza, also said the price hike will have an inflationary effect in the country driven by the expected increase in cost of doing business.
“As we know, oil prices are determined globally and a slight increase in its cost will also increase fuel prices in Zimbabwe.
“Fuel prices affect all sectors in the economy so it is likely that the cost of production for most businesses will increase especially for those who run generators during power outages and this would lead to inflation,” said Mr Matsheza.
“Unfortunately we do not produce oil but going forward businesses might need to rely on green energy,” he added.