A rebound in global oil price could pose a risk to the local market. This follows an agreement by the Organisation of Petroleum Exporting Countries (Opec) and non-Opec nations to cut output by a combined 1.8 million barrels per day (bpd) in the first half of 2017.
According to World Bank May 2017 Malawi Economic Monitor, Opec’s crude output, which averaged 33.5 million bpd during the third quarter of 2016, is expected to fall to 32.5 million bpd, if and when participating petroleum producers adhere to the agreement which also puts pressure on fuel reserves.
According to the Opec communiqué, the main intent for curtailing output was to reduce the large overhang of inventories.
In an interview on Monday, Petroleum Importers Limited (PIL) general manager Enwell Kadango said while fuel prices are determined by Malawi Energy Regulatory Authority (Mera), global fuel price hike could have an impact on the local market.
“Since two years ago, prices have been coming down but traditionally, oil prices normally go up. If global prices go up, it will have an impact on local prices whether you buy for reserves or not, it is going to be on the higher side. But a steady exchange rate would cushion this,” he said.
National Oil Company of Malawi (Nocma) communications officer Telephorus Chigwenembe said on Tuesday that with respect to the purpose of having strategic fuel reserves, Nocma is expected to ensure there is security of supply all the time.
“As such, regardless of what happens on the international stage, including price fluctuations, we still have to, and we will stock the reserves at whatever cost.
“On whether Opec’s decision could affect pump prices here in Malawi, it is Mera that is best placed to address issues to do with pricing,” he said.
Mera spokesperson Fitina Khonje was not immediately available for comment.
But in an earlier interview, Khonje said pricing assessment is based on the change that has happened from the last time they made reviews.
“We work based on actions that is why we cannot say whether fuel prices will rise or not because a rise in fuel prices is not only necessited by the changes on the international market, but also how the kwacha is fairing,” she said.
Since the last review of the In Bond Landed Cost (IBLC) of petroleum products in November 2016, the Malawi kwacha has depreciated by 0.06 percent from K733.50 per dollar noted at the last price review in November 2016 to K733.95 per US dollar noted in June 2017.
Mera has over the past months maintained pump prices at current levels which means that petrol price remains at K824.70 per litre, K815.80 per litre for diesel and paraffin at K648.70 per litre. n