Commentary: less fuel traders, higher costs of production

With a lot less licensed fuel importers, what can Zimbabwe expect in the coming months?

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  • 77% drop in licensed fuel companies
  • Monthly Fuel Price Review expected this week
  • Potential rise in production costs in months ahead

Following an April 30th 2021 fuel licensing application deadline, ZERA has reported a 77% decline in approved entities. Down from 130, only 30 companies are currently allowed to import fuel in Zimbabwe; a situation that may only change in April 2022 when ZERA fuel licenses will need to be renewed again. 

Implication

ZERA’s monthly Fuel Price Review is expected on or before May 5th. Previous revisions this year have led to a net increase in fuel prices. But with 130 licensed fuel importers, the market was fairly competitive from a supply-side point of view. 

As guided by ZERA’s monthly price revisions, market operators had the liberty to price their products at or below the regulated market cap, “depending on their trading advantages.”

With only 30 licensed fuel importers, the opportunity is ripe for monopolistic collusion that could lead to sustained fuel prices increases bordering the edges of ZERA’s fuel price ceilings. 

The downstream impacts do not only apply to motorists, but to any and all market participants that factor fuel as a production or operation input. Simply put, higher fuel costs are likely to be passed-on to consumers in the form of higher product and service costs. 

Although speculative, sufficiently liquid operators could pre-empt market changes and profit from stocking-up short to medium term reserves while pricing their fuel at more competitive market rates. 

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