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 January 2021, the average FOB prices of Petrol, Diesel and Paraffin increased by 30.54%,27.44% and 28.43%, respectively, when compared to the averages obtained in the month of November 2020 used in determining the ruling pump prices.

EXCHANGE RATE MOVEMENT

Since the last review of the In Bond Landed Cost (IBLC) of petroleum products in December 2020 the Malawi kwacha has depreciated by 1.30% trading at K778.84/USD from K768.81/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 and noted that the landed costs of Petrol, Diesel and Paraffin increased by 15.02%, 16.08% and 16.92%, respectively. The changes in the landed costs qualified the three petroleum products for a price revision since the changes in the landed costs were beyond the ±5% trigger limit.

The Board considered the economic negative impact the COVID-19 pandemic has on consumers spending power and how higher fuel prices would exacerbate the situation. Whilst noting the need to restore importers capacity vis-à-vis increased cost of importation, the MERA Board resolved to apply the Price Stabilisation Fund to meet the increased In Bond Landed Cost of petroleum products. 

Following this intervention, fuel pump prices have been maintained as implemented on 17th December, 2020 as presented below:

Product Ruling Pump Prices in MK per liter Recommended Pump prices MK/liter Percentage Change
Petrol 834.60 834.60 –
Diesel 826.40 826.40 –
Paraffin 613.20 613.20 –

MERA Board, in observing movements of FOB prices, has noted the continued increase in the prices on the world market whose impact will be assessed in March 2021. Further, the Board has noted that the current PSF level might no longer cover increased importation costs if FOB prices remain high.

The MERA Board will continue to monitor the trends and conduct monthly reviews of fuel prices using the Automatic Pricing Mechanism.

SIGNED          ____________________________________________

LEONARD CHIKADYA

BOARD CHAIRPERSON

MALAWI ENERGY REGULATORY AUTHORITY

19th February, 2021