Consumers Association of Malawi (Cama) has warned Malawians to prepare for an imminent fuel price hike following changes in basic fundamentals that determine petroleum pricing.
Speaking on Monday in Blantyre during a workshop to update journalists on petroleum pricing trends amid the Covid-19 pandemic, Cama executive director John Kapito said the recent slump in kwacha’s value and the easing of Covid-19 restrictions in most parts of the world will eventually result in Malawians paying more for petroleum products.
He said: “We know that there was no demand for petroleum products globally because of Covid-19.
“There was no activity on the global market and, therefore, the prices of petroleum products went down,
when people were importing and Malawi also [benefited] from lower prices of fuel.”
When making its price determination, Malawi Energy Regulatory Authority (Mera) assesses the combined effect of the movement of Free On Board (FoB) prices, kwacha exchange rate against the dollar and changes in local factors such as inflation.
The kwacha is currently losing value, trading at around K756 against the dollar in authorised dealer banks.
Kapito said now that people are managing to live with Covid-19, “we have noted that there is demand where prices internationally have started going up and Malawi will be affected”.
Yesterday, Reuters reported that oil prices climbed 49 cents, or 1.1 percent, to $45.77 (about K33 750) a barrel.
The price has jumped from below $20 (about K15 000) a barrel registered in March, when the global oil industry faced its biggest demand drop in history.
Kapito said the most recent trend in global prices have so far not been reflected on the local market because Mera is cushioning the prices using the Price Stabilisation Fund.
He said: “The reduction in fuel prices was a good development for Malawi as it helped to calm the markets and we saw that benefitting everybody.
“The consumer should now prepare to pay higher prices.”
On her part, Mera spokesperson Fitina Khonje said they can only make fuel price adjustments when the regulator’s board has been instituted. The Mera board was dissolved in June this year.
“The establishment of Mera was provided for in the Act that we should have a board and we are sure that the appointing authority is well aware of this and they are working on it,” she said.
Up to the first half of this year, Mera revised fuel prices downwards three times before maintaining them at K690.50 per litre for petrol, K664.80 per litre for diesel and K441 per litre for paraffin.
In an earlier interview, energy expert Grain Malunga, who previously served as Minister of Energy and Mines, observed that the rising global oil prices could lead to fuel increases on the local market as players strive to meet importation and price costs.
Reserve Bank of Malawi Governor Wilson Banda recently said there are impending significant inflationary pressures emanating from a gradual pick-up in food prices. n