Business News

Global oil prices rise mounts pressure on local prices

Global oil prices continue rising, putting pressure on local pump prices, which the Malawi Energy and Regulatory Authority (Mera) already projected to rise this month.

On the global front, growing geopolitical tensions between Russia and Ukraine, as well as speculation of a further rise amid tight supply have helped push up global oil prices to a seven-year high.

Global fuel price hike could trigger upward adjustments on the local market

According to CNBC, Brent crude futures, the international oil benchmark, topped $90 on Wednesday for the first time since 2014, adding to oil’s blistering recovery since its pandemic-era lows in April 2020.

The rise comes as Wall Street banks and oil executives are forecasting a return to $100 oil.

“Opec+ production has been gradually increasing, but still not enough to keep up with demand,” Rohan Reddy, a research analyst at Global X Management, a firm that manages $2 billion in energy related assets told Bloombergon Friday.

Reserve Bank of Malawi figures show that Global Brent crude oil prices recorded a decline at the end of December to $73.60 per barrel from $81.05 per barrel in November 2021.

In December 2021, domestic pump prices for both petrol and diesel were maintained at their October 2021 positions.

Specifically, the pump price for petrol closed December 2021 at K1150.00 per litre while that of diesel stood at K1120.00 per litre.

Already, Mera has hinted on effecting a fuel pump rise in February 2020.

This is because the combined effect of key variables in the  determination of fuel prices may result in higher landed costs of petroleum products in February 2022.

According to Mera, to date, the landed costs of petrol, diesel and paraffin have increased by 6.04 percent, 13.35 percent and 13.91 percent, respectively. 

On the other hand, the price stabilisation fund (PSF)-created to cushion fuel prices-balances for petrol, diesel and paraffin averaged K0.9 billion against the recommended minimum of K5 billion as at January 25 2022.

Under the automatic fuel pricing mechanism, pump prices qualify for an adjustment when the landed costs of petroleum products move beyond the ± 5 percent trigger limit.

Meanwhile, Consumers Association of Malawi (Cama) executive director John Kapito says the looming price hike is a cause for concern to consumers who will have to part with their incomes.

He said: “We cannot run away from these sad economic realities.

“We have an economy that is completely broke and under pressure.”

Related Articles

Back to top button