Mera cautious as global oil prices rise
Malawi Energy Regulatory Authority (Mera) says it is monitoring the global trends in oil prices, saying the impact of the development on local prices will be assessed to determine if it is significant enough to warrant local pump price revision.
Mera spokesperson Fitina Khonje said this in a written response on Wednesday in reaction to rising global oil prices currently at about $57 a barrel (about K44 460) following the weaker dollar and demand for the commodity in most economies across the globe.
She said: “Since we import fuel, the trends on the international market have a significant bearing on the determination of the prices in Malawi
“With the Automatic Pricing Mechanism the pump prices have to be in line with the movements in the international prices as well as the performance of the kwacha against major trading currencies.
Last month Mera increased pump prices by 28 percent due to the increase to fuel landing costs and the depreciation of the Kwacha.
Petrol rose from K690.50 to K834.60 representing 20.87 percent, diesel from K664.80 to K826.40 representing 24.31 percent and paraffin from K441.70 to K613.20 representing 38.83 percent.
In his reaction to the development last month Consumers Association of Malawi (Cama) executive director John Kapito, while agreeing with Mera over the causes of the price increase noticed some time back argued that the increase could have been avoided especially if the regulator was reviewing the prices monthly as is required by the law.
“If Mera had been reviewing the fuel prices monthly, starting immediately after June, the increases could have been gradual and not exert too much impact on consumers,” said Kapito.
Meanwhile, available figures show that international oil prices have picked up since May 2020. Brent crude oil prices averaged $42.7 per barrel(about K 33 306) in the third quarter of 2020 from $31.4 per barrel (K24 492) recorded in the second quarter of 2020.
The International Monetary Fund (IMF) however projects that petroleum spot prices will average $46.7 per barrel in 2021, and thereafter remain stable over the medium term.
The projected decline in oil prices in 2020 is due to weak demand caused by Covid-19 mitigation measures and this has sharply curtailed travel and transport, which account for around two-thirds of oil demand.
When making its price determination, Mera assesses the combined effect of the movement of the Free On Board (FoB) prices and kwacha exchange rate against the dollar as well as changes in local factors that determine the maximum pump prices.
In the just ended year, the kwacha has been volatile, shedding about 4.55 percent against the dollar, a development which necessitated an increase in pump prices last December.
Fuel prices have a knock-on effect on the cost of transport, goods and services, which in the long-run impact inflation.
