Update on Trends of Economic Fundamentals and their Impact on the Landed Cost of Petroleum Products
The Malawi Energy Regulatory Authority (MERA) is mandated to determine prices of energy sales and services. The key fundamentals that affect the landed cost of petroleum products are the exchange rate of the Malawi Kwacha against the United States Dollar (USD) and the Free on Board (FOB) prices of refined petroleum products on the international market. The movements of the two fundaments since the last revision of the prices of petrol, diesel and paraffin are summarised as follows:
FOB PRICE CHANGES
Impact on the Landed Cost
The In Bond Landed Cost comprises FOB price, Freight, Product Insurance, Product Handling Charges, In transit losses at 0.5% and the exchange rate of the Kwacha to the USD. The resultant change of landed costs from the movements of key fundamentals are as follows:
Under the Automatic Pricing Mechanism (APM) which was adopted in 2012, prices ought to be adjusted when the change in the landed cost goes beyond the ±5% trigger band. The APM ensures that importers directly and timely recover importation costs.
MERA will communicate the outcomes of the energy price reviews in due course.