How did the Zimbabwe Petroleum Market Evolve in the Last 20 Years?
Petrol is one of the most precious commodities across the globe. Its supply has the power to accelerate and completely stop the world. The sub-sector of petroleum products in Zimbabwe is owned by public and private enterprises. Over the past 20 years, the market has seen a rough phase of hiking prices and resulting consequences like extensive inflation. The fuel prices are further decided as per market forces, however, a pricing formula is also taken into consideration.
The petroleum market in Zimbabwe imports 100% of fuel requirements via raid, pipeline, and road. Besides, the petroleum market in Zimbabwe is regulated by ZERA. The products incorporated in Zimbabwe’s petroleum market include diesel, petrol, denatured ethanol, paraffin, ethanol blends, LPG and Jet A1 . In addition, Zimbabwe ranks at 126th position in terms of oil consumption as of 2016 with an intake of 24000 barrels per day. In the past few years, the country has observed a sharp rise in the demand for crude oil leading to several shortages and price hikes. Now, let’s take a look at how the market has evolved since 2002.
2002 – The Low Level of Supplies
Petrol shortage has always been a problem for Zimbabwe. In 2002, the country was forced to operate with a minimum of 40% of its usual supplies. Several factors attributed to this shortage include shortage of foreign exchange and inefficient management and processing at the NOCZ causing major waste in the manufacturing unit itself. It was the time when the urban poor of the country realized and questioned industry policies concerning the stability of Zimbabwe’s liquid fuel industry .
2005 – Spike in the Fuel Prices
In 2005, petrol prices in Zimbabwe observed a major hike of 200%. The petrol rose from R2.44 per litre to R6.77 per litre. On the other hand, diesel prices hiked from R2.23 to R6.50 as per Petroleum Marketers Association. The reason for this approximately 200 % rise in petroleum product prices was an international spike in oil prices. It further led to the devaluation of the Zimbabwe dollar .
2009 – Steady Rise in Fuel Consumption
While recovering from the hyper-inflation in 2008 showing a major decline in fuel supplies, the government adopted trade liberalization. As the country began to liberalize its trade, the automotive industry experienced a surge in the supply of vehicles. Hence, the fuel consumption increased steadily. Moreover, factors like electricity shortage, increased urban population, changes in development and company policies led to a hike in demand for diesel and petrol fuel .
2015 – 100% Oil Import Affects the Market
In 2015, Zimbabwe’s fuel prices were termed as the 25th highest in the world. As Zimbabwe imports all of its oil requirements, the oil prices experience volatility as per the changes in the international oil market. In 2015, the global oil prices experienced a substantial decline, however, the Zimbabwe government could offer only a marginal decline of US$ 0.03. The reasons for this short decline include an increase in customs. The government of Zimbabwe was stuck in a cash strap, which led to this condition .
2017- Policy Framework of the Petrol Industry
As per the assessment of Bimha and Manapo, 2017 , it was found that the petrol industry of Zimbabwe has an inept regulatory framework. This framework doesn’t offer an explicit policy that defines accurate guidelines and accountability within the supply chain. All these factors were well-represented by the state of hyperinflation in the economy.
2019- The Year of Massive Hikes in Fuel Prices
In 2019, Zimbabwe announced a major hike in fuel prices. This hike came as the government stepped back from providing funding to petrol and diesel dealers. The country observed a 46% hike in petrol prices and a 49% rise in diesel prices as per ZERA .
The factors contributing to this hike reflect the rise in demand and stagnant condition of the economy .
2021-22 The Hike Continues
In 2021, it was shown that government interventions have been deregulated. Though certain influences on the prices are still observed on the part of the government .
All in all, the data from Global Petrol Prices show that from 2021 to 2022, the petrol prices in Zimbabwe have observed a considerable hike in the prices. It began from 123.71 Zimbabwean dollars in Oct 2021 and reached near 154.00 Zimbabwean dollars in Jan 2022 .
Conclusion
Overall, in the last 20 years, the petroleum market of Zimbabwe observed various ups and downs. This rollercoaster ride has crossed through inefficiency, supply shortage, limited forex, the influence of the global international oil market and many more aspects representing the sluggish state of the Zimbabwean economy.
Moreover, the gradual and consistent rise in prices and leading inefficiencies of the government system have made it critical for the fuel stations to find a partner, which would aid efficiency through technology along with required forex reserve in order to gain resilience within the external forces and further perform a profitable business.
