Fuel prices hike, any impact on business?

Motorists and businesses are bracing for increased fuel costs following a US$0.05 hike in pump prices for both petrol and diesel, effective last Thursday.

The Zimbabwe Energy Regulatory Authority (ZERA) confirmed the adjustments, pegging diesel at US$1.58 per litre and petrol (E15 blend) at US$1.53 per litre, up from January’s US$1.53 and US$1.48, respectively.

The sharp increase in global crude oil prices is being cited as the main driver of this domestic fuel price adjustment.

Brent crude prices surged past US$80 per barrel in early January, fuelled by geopolitical uncertainties, tighter illegal sanctions on Russian and Iranian oil, and severe winter storms in North America.

December 2024 had witnessed range-bound trading, with investor sentiment oscillating between expectations of higher U.S. tariffs and a balanced 2025 supply outlook.

At the time of writing, Brent futures remain volatile, hovering around US$81 per barrel.

Zimbabwe, which imports all of its refined fuel, is highly susceptible to global price swings, with the latest spike prompting concerns over inflationary pressures on the broader economy.

Economic analyst, Namatai Maeresera, warns that the ripple effects of expensive fuel prices could deepen Zimbabwe’s inflation woes, which have already seen fluctuations in recent months.

“The increase in Brent crude prices might lead to imported inflation as local fuel prices rise, translating into higher supply chain costs,” Maeresera noted, adding: “This will inevitably be passed down to consumers in the short term, exacerbating pressure on disposable incomes.”

Higher fuel prices have historically been a key driver of inflation in Zimbabwe, given the country’s heavy reliance on road transport for goods movement.

The country has weak and in some cases, non- existent railway system in key economic areas.

Rising logistics costs could translate to increased prices of essential goods, further straining households already grappling with a depreciating local currency and stagnant wages.

Despite the current price surge, global forecasts suggest that Brent crude prices may remain somewhat restrained in 2025 due to sluggish demand from China and concerns over oversupply.

Analysts predict that oil will average US$74.57 per barrel this year, marking a slight upward revision from earlier projections. However, the persistence of illegal sanctions on Russian crude and potential geopolitical flare-ups could inject volatility into the market, keeping fuel costs elevated in the near term.

Locally, the price hikes come at a particularly challenging time as the Government has been striving to stabilise inflation and cushion businesses from economic shocks.

Tinevimbo Shava, an economist, echoed these concerns, warning that the fuel price hike could severely impact small businesses.

“Many small enterprises rely on transport for their daily operations. With fuel costs rising, we are likely to see higher operational costs, leading to relatively small price hikes across various sectors. This could stifle economic activity and reduce consumer spending,” Shava explained.

Industrialist, Dr Nxaba Ndiweni, expressed concerns about the impact of rising fuel costs on manufacturing and distribution.

“If transport and production costs continue to rise, we may see a knock-on effect on commodity prices, worsening inflationary pressures,” he commented.

Meanwhile, ZERA has urged fuel operators to adhere to regulated pricing structures while allowing room for competitive pricing based on trading advantages. However, consumers remain sceptical, with many expecting pump prices to rise further if global crude oil prices continue on an upward trajectory.-ebsnesswekl