The continued global outbreak of the deadly coronavirus has left globe oil prices tumbling as travel restrictions across the global intensify, leaving the global market with an oversupply situation against strained demand for the commodity.
While the news is stressing for oil producing countries plying their trade under Organisation of Petroleum Exporting Countries (Opec), the development is sweet news for net oil importing countries such as Malawi which is keeping its fingers crossed to fully reap from the global fuel price plunge.
On Monday, the price of international oil benchmark brent fell by almost a third in its biggest drop since the Gulf War in 1991 before recovering slightly to 20 percent lower.
In an interview on Tuesday, Malawi Energy Regulatory Authority (Mera) chief executive officer Collins Magalasi said the prevailing global developments surrounding the oil industry could benefit local consumers from declining oil prices.
Said Magalasi: “What we see is that global fuel prices could even go down by 30 percent and if we happen to buy the oil while the price is low, looking at the face value, it shows that Malawians will benefit.”
However, he stressed that fuel pricing is not only dependent on the cost of purchasing the commodity, saying there are other factors such as transportation costs, insurance and exchange rate adjustments.
Magalasi also said there is a high probability, going forward, that the local currency could appreciate. He said as the economy may accumulate more foreign currency since people may not externalise it to China in the wake of a lockdown due to coronavirus.
With the virus, China, the world’s biggest importer of crude oil, and usually consumes about 14 million barrels a day, needs a lot less oil to power machinery, fuel vehicles, and keep the lights on.
Already, the outbreak has severely hit demand for jet fuel as airlines around the world suspend flights to China, while travel restrictions within the country mean far fewer flights.
However, Reseerve Bank of Malawi (RBM) says the worldwide spread of novel coronavirus is threatening to compromise the country’s growth prospects.
RBM director of communication and protocol Mbane Ngwira told Business News on Saturday the impact of the virus set to be confirmed by the monetary authorities, including the International Monetary Fund (IMF) which is in the country for the Extended Credit Facility (ECF) reviews, cannot be downplayed.
He said: “There would definitely be a negative impact of the coronavirus on the economy which is likely to undermine our growth prospects but the actual impact and by how much this would affect growth may not be established as of now