eBusiness Weekly
Business Writer
The fragile Zimbabwean economy cannot afford to take the full impact of rising oil prices and authorities will have to find ways of cushioning motorists and industry, a senior official has said.
Brent oil surged above US$100 a barrel on Thursday morning as Russia’s attack on cities across Ukraine sparked fears of a disruption to the region’s critical energy exports.
This is the first time since 2014 that oil prices have gone above the US$100 a barrel mark.
The escalation spooked a market that was already under stress, as oil supplies around the world fail to keep pace with the vigorous recovery in demand from the pandemic.
The OPEC+ coalition led by Saudi Arabia is struggling to restore production quickly enough, prompting some of the biggest market players to warn of an increasingly tight market.
Oil prices are likely to average US$110 in the second quarter as tensions over Ukraine continue to escalate, JPMorgan Chase & Co. said this week before the latest escalation.
The crude market is likely to see sustained higher prices in the next quarter, before retreating to an average of US$90 at the end of the year, according to the bank.
Zimbabwe is likely to feel the impact of the latest rise in fuel prices in March and April going forward depending on how long the crisis and rising oil prices will last.
According to Zimbabwe Energy Regulatory Authority (ZERA) chief executive officer, Edington Mazambani, prices for any particular month, which are announced on the 5th of every month, are determined by the average price of the previous month.
For example, fuel prices for the month of March, 2022 will be determined by the average prices recorded in February, part of which will be affected by rising fuel prices experienced in the last couple of days till month-end.
According to Tradingeconomics.com, a website that tracks commodity prices, Brent prices were up by more than 7 percent as of 11:23 am local time.
Mazambani said authorities would have to consult on how best to cushion the country against pressures in international oil prices.
“Because if we are to take the full hit, it will have a negative impact on the economy, so we will have to find ways and means of cushioning the impact to the economy.”
Mazambani, however, allayed any fears of supply constraints saying Zimbabwe imports its fuel from the Middle East “where we are pretty much secure.”
“I understand that America will also be stepping up production so that they can actually supply to Europe.
“So supply will not be very much of a challenge but we will keep on the lookout for any potential hitches of the supply of the product,” said Mazambani.
He added that the country has sufficient supplies “to take us through the storm.”
“We expect that the conflict would be resolved soon, but at the moment there is no need to worry about fuel supplies, we are pretty much secure for now unless the crisis persists.”
Russia is a key supplier of energy to global customers, with Europe relying on the nation for about a quarter of its oil supplies and a third of its gas.
Dollar impact
Meanwhile, the U.S. dollar strengthened sharply yesterday and was by mid-day up 1,2 percent against both the British Pound and the Euro. It had also firmed 1,5 percent against the South African Rand.
While a strengthening dollar makes Zimbabwe products expensive, it makes imports from major trading partners such as South Africa cheaper. Zimbabwe is a net importer and would benefit from imports from countries where the dollar has strengthened against the respective currencies.
Gold impact
Globally, gold prices jumped over 1.50 percent to their highest in more than a year, with investors flocking to safe havens as Russian forces invaded Ukraine after President Vladimir Putin authorised a “special military operation”.
By mid-day yesterday, gold was up 2,4 percent to US$1 953.12 on the tradingeconomics.com website. Zimbabwe relies heavily on gold exports and miners are likely to ramp up production and deliveries.
