Mera calls for patience on reduced global fuel price

Malawi Energy Regulatory Authority (Mera) says consumers will have to wait until January 2022 to benefit from the global fuel price drop if the current trend is sustained.

Mera’s remarks come in the wake of falling global oil prices, which declined to a three-month low and the biggest one-day drop of 10 percent since April 2020 on Friday amid concerns that the new Omicron Covid-19 variant will dampen economic growth and hit global oil demand.

In an interview on Monday, Mera consumer affairs and public relations manager Fitina Khonje said the pump prices will also be determined by landing costs and exchange rate.

She said: “The free-on-board prices and exchange influence pump prices.

“The impact of these developments will be assessed in January.”

Brent, the global benchmark for two-thirds of the world’s oil, slid 11.55 per cent to $72.72 per barrel when markets closed on Friday while the US crude gauge West Texas Intermediate dropped 13.06 per cent to $68.15 per barrel, the largest one-day decline since April 2020, according to The National.

However, on Monday, Reuters reported that oil prices rebounded as investors looked for bargains after Friday’s slump and on speculation that the Organisation of Petroleum Exporting Countries and its allies (Opec+) may pause an output increase in response to the spread of Omicron.

Resultantly, prices jumped over four percent, with Brent crude futures climbing $3.17 or 4.4 percent to $75.89 a barrel.

Meanwhile, oil producers’ cartel Opec is  scheduled to meet on December 2 when a policy decision will likely be announced on whether to adjust its plan to increase output by 400 000 barrels per day in January and beyond.

The decision could affect global economy and fuel demand.

The rising global oil prices drove government to raise pump prices by 22.8 percent on average last month.

Effectively, petrol went up by 27.89 percent to K1 150 from K899.20, diesel went up by 24.72 percent from K898 to K1 220 while kerosene rose by 15.79 percent to K833.20 from K719.60.

This pushed the Reserve Bank of Malawi (RBM) to revise upwards the 2021 and 2022 inflation projection on account of rising fuel prices, increasing maize prices and global supply chain disruptions.

In a Fourth 2021 Monetary Policy Committee (MPC) Statement, RBM Governor Wilson Banda said the central projects headline inflation for 2021 to average 9.1 percent, representing an upward revision of 0.3 percentage points from the Third 2021 MPC Statement.

Said Banda: “The revisions reflect the impact of the recent increase in domestic fuel pump prices, a higher-than-anticipated rise in maize prices in the fourth quarter of 2021 and persistent disruptions to global supply chain.

Malawi’s year-on-year headline inflation rate for October 2021 increased by 0.9 percentage points to 9.8 percent from 8.9 percent the previous month, according to the National Statistical Office.