BACKGROUND

Malawi Energy Regulatory Authority (MERA) considered recent trends in the world petroleum products prices and changes in other macroeconomic fundamentals in the local market and their impact on energy prices.

PETROLEUM PRODUCTS INTERNATIONAL PRICES

In April 2020, the average FOB prices of petrol, diesel and paraffin declined by 40.51%, 39.65% and 56.57% respectively when compared to FOB prices which were applied when determining the ruling prices. The noted plunge in oil prices on the international market is attributed to the continued spread of Covid-19 which has led to a global slow-down of economic activities which has depressed the demand against the supply of oil.

EXCHANGE RATE MOVEMENT

Since the last In Bond Landed Cost (IBLC) review in March 2020, when pump prices were last revised, the Malawi Kwacha has remained stable trading at K743.87/USD.

PUMP PRICES

MERA assessed the combined effect of the movement of the FOB prices and exchange rate of the Malawi Kwacha to the United States Dollar as well as changes in local factors that determine the maximum pump prices. It was noted that the landed costs of petrol, diesel and paraffin decreased by 37.50%, 19.89% and 41.49%, respectively and that according to the Automatic Pricing Mechanism (APM) all the three products qualified for a price adjustment since the changes in their landed costs were beyond the ±5% trigger limit.

The Authority is aware that just like all other sectors of the economy, the Liquid Fuels and Gas Industry has been affected negatively by the impact of Covid-19. The preventive measures that are in place to curb the spread of the disease have resulted in a significant drop of local demand for petroleum products with Oil Marketing Companies and retailers selling a fraction of their normal sales. It is for this reason that the Authority resolved to grant a temporary increase of the wholesale margin and retail margin by K2.50/litre and K3.00/litre, respectively, subject to monthly reviews to keep the industry afloat and hence to ensure security of fuel supply for the country.

Therefore, in line with the APM and having made consideration to increase industry margins, the MERA Board resolved to revise downwards the pump prices effective 8th May 2020 as follows:

All operators are required to sell petroleum products at prices not exceeding the above maximum pump prices.

It is the expectation of MERA Board that other sectors, including transportation, will respond accordingly to this pump price reduction.

SIGNED

Rt. Rev. Dr. J.P. Bvumbwe Dr. Collins Magalasi

BOARD CHAIRPERSON CHIEF EXECUTIVE OFFICER

6th MAY 2020 6th MAY 2020