adminAccording to Trading Economics, diesel prices have increased by about 281 percent from the 1991 figure.
Although there maybe regular fluctuations the price of fuel is likely to raise continuously due to the international oil price surge.
Fuel price increases are driven by market forces such as inflation, cost of crude oil. Global events such as wars, security threats to big oil suppliers, political instability in oil producing countries for instance violence in Middle East, ethnic tension in Nigeria and the BP oil spill in 2010 that affected the Gulf of America.
However, the recent increase in fuel prices in Zimbabwe was mainly due to supply and demand mechanisms. As fuel suppliers form a cartel, they decrease the supply forming artificial shortages within the market to cater for those who are willing to pay more.
As this mechanism continues, prices will also continue to rise, the unfortunate part is that, this process hardly works in reducing prices especially
for fuel due to unlimited availability.
Recently the pump price of fuel increased with petrol prices increasing by 5,44 percent and diesel by 6,06 percent.
However, the price of E10 is 5,44 percent less than its substitute .The cost of living has increased by 0,50 percent from US$567,90 as at February this year. The food basket cost has also increased by 1,6 percent from US$155,43 .
This is only a snap shot of how fuel price increases have affected the people .There is a close relationship between cost of fuel and the cost of living. A country can only strive if it controls its strategic business units. In the same units there is need to include fuel or energy to integrate all units.
Some countries such as Zimbabwe are heavily endowed with resources, but they are among the poorest countries. The idea here is that owning resources and using them, are two different things due to dependency. Like cancer the dependency syndrome has a long latency period, our choices today will affect generations to come. In Zimbabwe we are capable of blending E10, that is petrol containing 10 percent ethanol which is from available and sustainable resources such as sugar cane.
By using E10 there is a high probability of increasing our energy independence. Importing fuel has a negative impact to the Gross Domestic Product.
In fact all the components of GDP are adversely affected. Looking at Government spending, importation of unleaded fuel is annually funded by a US$80 million bill. Saving this amount and blending 20 percent ethanol would decrease our trade deficit by US$160 million. The move would also increase jobs and also reduce unemployment and this would increase Government revenues from corporate and individual taxes.
Consumption by individuals (households) and firms excluding Government would also benefit from adapting our local blended fuel. By using local fuel this would increase consumer surplus, by saving 5 cents per litre of fuel on 50 million litres per month, by not using locally blended fuels the aggregate monetary value that consumers forgo amount to US$30 million per year.
If this amount is used on infrastructure development, it would decrease the cost of living ,and increase our marginal social-well being
By exporting fuel we bring in, we will also be exporting inflation which also affects other sectors of the economy.
Impact of price changes affects business activities that is why it is important to have economic independence, especially in fuel production through the use of resources that are within our reach. By not using our local fuel 2 600 people have lost their incomes. A total of 3 237 jobs are lost, this all falls back to the society as this results in increased social delinquency and economic dependency.
Without changing our mindset it would be difficult to have Foreign Direct Investment, because the credibility of the environment as a hub for investment would be compromised.
The cost of not buying our locally blended fuel also translates to 18MW of power supply not being produced for the year. Cost of purchasing power from Mozambique amounts to at least US$8,5 million, this bill can possibly be minimised as avoidable costs.
The Chisumbanje plant and other firms that manufacture bio-fuels will not be able to access loans as their credit ratings would be tarnished and they would be considered unstable.
Business is a process where there should be suppliers and consumers for the products. For a strategic product, if supply surpasses demand the product would be booted out of the market but the effect would fall back to consumers in the long run.
Besides the economy as a whole, Manicaland province which was supposed to benefit from the project also faces a decrease in development and economic growth. The province was supposed to benefit from improvement in local infrastructure such as roads, hospitals and schools. It is also possible to convert a car so that it would be able to use E10 up to E85 or natural gases as the price of gasoline is still escalating
However, up to now the economic cost that would be brought by using E10 are the externalities that it exposes to the third party in terms of pollution especially for those people living near the plant.
The increase in carbon dioxide and other substances released into the air. There are also some claims that you need more E10 to cover the same mileage as compared to its substitutes.
In this case there is no empirical evidence to support that notion. Others also say that E10 has detrimental effect on engines which is also speculation that has just hit the industry and in the same case there is no scientific evidence to support that view.
Weighing costs and benefits, it is fair enough to support our own blending industry if we need to boost our economy.
It’s our economy, so we have to build it, and a mere change of mindset in business opinions and views. This will go a long away in boosting economic activity and stability.
That way will cure the dependency syndrome before it becomes an incurable disease.
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Online Reporter