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Zimbabwe Announces Dual Pricing for Fuel - 2003-08-28

The Zimbabwe government has announced a dual pricing system for petroleum products, allowing gasoline prices to triple. This is the latest in a series of steps by President Robert Mugabe's government to end the country's worsening fuel shortages. Under the new arrangement, the government will import fuel only for its own use, that of public transport operators and the agricultural sector. This fuel will remain at the controlled priced of 50 and 30 U.S. cents per liter respectively for gasoline and diesel.

But, in what amounts to an admission of its failure to deal with the intermittent fuel shortages dating back to late 1999, the government has surrendered its monopoly on the importation of fuel by giving oil companies the green light to import. Minister of Energy Amos Midzi said in a Wednesday statement the oil companies can sell the fuel at what he called market related prices.

Private citizens will pay the pump price set by the oil companies of up to U.S. $1.42 per liter for gasoline, and U.S. $1.29 for diesel. These prices will fluctuate based on procurement costs and inflation.

The oil company prices are lower than what Zimbabweans have been paying for fuel during the past few months. Most gas stations have had no supplies for nearly five months, and the government turned a blind eye to private importers who brought in fuel, sold it at more than four times the government price and in some cases demanded payment in U.S. dollars. A lot of the fuel the government imported for public transport operators also found its way onto the black market where huge profits were made.

The government, which had the monopoly on fuel procurement, has in the past gone into fuel supply agreements with oil producing countries, notably Libya. But all the deals collapsed, as Zimbabwe defaulted on payments mostly as a result of a crippling shortage of foreign currency.

University of Zimbabwe economist Tony Hawkins says the new prices will speed up inflation, which stands at an all time high of 400 percent. He added that the impact on companies and individual motorists will be minimal, as they are already paying more for their fuel.