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Mozambique: Fuel distributors call for help to keep supplies flowing
2:18 CAT | 06 Jul 2022
File photo: DW
Fuel distribution companies in Mozambique called on Tuesday for measures to ensure the continuity of crude oil supplies in the country, warning that “artificially low prices” are being charged, even with the latest increases in the product.
“Clearly, here [in Mozambique], the price is artificially low and all [market] players are doing everything they can to keep the price artificially low in relation to neighbouring countries,” said Simone Santi, president of the Mining Resources and Energy sector of the Confederation of Mozambican Economic Associations (CTA).
Santi was speaking at a press conference on the entry into force of new fuel prices on the 1st of the month and following the strike on Tuesday of public transport due to the rising cost of oil products.
The CTA leader said that the margin of increase the government decreed did not cover the costs incurred by fuel distributors, because the authorities had determined a reduction of profit in the activity to prevent a real price increase for the final consumer.
He also noted that the government had avoided sharp rises in fuel prices for the benefit of consumers, but that policy had caused losses for operators in the sector.
The CTA official said that the price of crude oil was so low in Mozambique that consumers from neighbouring countries were entering the country to buy oil products.
Santi said that the sector operators would step up dialogue with the government and banks to find solutions to keep the import and distribution of fuel in the country at sustainable levels for all parties.
Paulo Varela, chairman of Galp in Mozambique, described the situation of companies in the fuel distribution sector as “extremely serious,” as the prices charged far from offset the costs of the business.
“The situation is extremely serious, the international situation we are experiencing today is unprecedented,” Varela said.
Russia’s war in Ukraine is the most immediate cause of the fuel crisis, but there was already pressure on demand before, due to the easing of restrictions against the Covid-19 pandemic, he said.
On the other hand, the deactivation of refineries in some countries, as part of commitments to the energy transition, also reduced the supply of processed oil products, he explained.
The head of Galp advocated measures for the sustainability of the distribution sector in Mozambique, noting that, “more serious than very high costs would be a break-up scenario”.
The president of the Association of Fuel Retailers of Mozambique (Arcomoc), Nelson Mavimbe, said that “there are indications of companies in the sector closing down,” as the business becomes unviable, warning of mass closures.
“The sector is indeed being buffeted, it is in an extremely weakened situation,” Mavimbe complained, without providing figures.
Measures to contain the rise in crude oil prices recently imposed by the Mozambican authorities have resulted in a 30% reduction in the profit margin, he added.
That intervention by the authorities, he continued, worsened business conditions, because the incidence on profit had not been touched for over two years, by government order.
“Operating costs are getting worse every day,” he stressed.
The national director of Hydrocarbons, João Macanja, told the daily newspaper Notícias that five small gas stations had stopped selling fuel in the country due to high costs.
On Tuesday, the Mozambican government announced a subsidy for collective carriers in provincial capitals to prevent spontaneous stoppages such as those that took place that day in Maputo, which left the capital with long queues and confusion at some points.
“Within two weeks, a mechanism” of financial support from the state to passengers should be in place for a period of six months, so that users can support future “sustainable” fares for operators in the sector.
While this subsidy for passengers is prepared, “the state subsidises the carriers”, Osório Sitoe, spokesman for the ministry of transport, explained today at a press conference.
The agreement allowed transport to start circulating again, said Castigo Nhamane, president of the Mozambican Federation of Road Transport Carriers Associations (FEMATRO), without further details about the amounts.
On Friday, Mozambique’s Energy Regulatory Authority (Arene) announced the third fuel price hike this year, with cooking gas up almost 20%.
The war in Ukraine and global inflationary pressures led to the new prices, which came into effect on Saturday.
Source: Lusa
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