Maputo — Fuel distribution companies in Mozambique believe that the climate of uncertainty that characterizes the current business environment in the sector could lead to a rupture in supplies in the coming months.
They warn that the risk is real if they are forced to keep retail fuel prices artificially low. They added that, even if prices are not readjusted in line with the real costs of importing fuel, the government could guarantee price stability through fair compensation to the distribution companies, with whom it has already incurred a debt of more than 120 million dollars.
The message was expressed by the President of the Mozambican branch of the Portuguese fuel company GALP, Paulo Varela, after a meeting held, on Tuesday in Maputo, with the Confederation of Economic Associations of Mozambique (CTA), in the search for solutions to mitigate the effects of the rise in fuel prices.
"However, despite the less favorable environment, provoked by the increase in prices in the international market, the distributors emphasize their commitment to continue supplying the country, within a framework of dialogue and understanding with the various entities that govern the functioning of the sector in Mozambique", said Varela.
"The sector is in trouble due to the current situation of high prices caused by the Russia-Ukraine conflict", stressed Varela.
Nonetheless, he continued, the companies must continue working to guarantee the availability of products and at the lowest possible costs. "More serious than the high prices, would be the possibility of running out of fuel altogether," he warned.
Varela said it was predictable that retail fuel prices would rise to the current levels, because of the successive increases in the price of refined fuels on the international market, although Mozambique continues to practice the lowest prices in the Southern African region.
"What we need to understand is that the retail price of fuel is fundamentally impacted by the purchase price", he said.
Varela added that Mozambique is penalized because 100 per cent of the petroleum products it imports are refined, and are more expensive than crude oil. This is unavoidable since Mozambique has no oil refineries of its own.
Since September 2021, he says, filling stations have been selling fuel at below cost. Six months ago, distributors were importing a tonne of diesel at a price of 800 dollars, which, however, has risen to between 1,200 dollars and 1,400 dollars today. Projections, meanwhile, suggest that the price of diesel will reach 2,000 dollars a tonne by August.
"We have been making a great effort to maintain the supply", he claimed.
There have already been three increases in retail fuel prices this year. In the latest increase, which took effect on 2 July, the price of a litre of petrol rose from 83.3 to 86.97 meticais (4.4 per cent) while the price of diesel rose 11.4 per cent, from 78.97 to 87.97 meticais per litre.
The Mozambican Association of Fuel Retailers (ARCOMOC) took a much tougher stance than Varela. It complained on Tuesday of enormous losses, because of the low fuel prices set by the government.
The association, which includes distributors, dealers and retailers of Liquefied Petroleum Gas (LPG), commonly known as cooking gas - warned that some entities have already given up the business because it has become unsustainable under current conditions, and his would soon have a major impact on citizens.
"The sector is being buffeted with operational costs and is weakened because of the containment measures to avoid further price increases. The reduction in margins has completely strangled the sector", said the representative of the association, Nelson Mavimbe, at the end of the meeting held with the CTA.
Mavimbe explained that the resellers used to earn around seven meticais per kilo when they sold cooking of gas, a margin that has been reduced to 4.9 meticais.
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According to the current legislation for the fuel sector, he says, the review of LPG profit margins should be done on an annual basis. But there has been no such review for the past two years, he claimed.
According to the association, the distribution chain is unable to mobilize additional means to support operational costs, including human resources and storage facilities.
"These costs make it totally impossible to exercise the activity", he declared. "We already have some central storage companies that have closed their doors".
Therefore, ARCOMOC believes that the new price list presented by the Energy Regulatory Authority (ARENE) is well below the expectations of operators in the sector, which is an unknown factor for the future of the activity.
The price of a kilo of gas rose from 85.53 to 102.02 meticais. This was an increase of 19.28 per cent - and ARCOMOC believes it should have been much higher.
