REVIEW OF PRICES OF PETROL, DIESEL AND PARAFFIN FOR THE MONTH OF OCTOBER 2021

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

The average FOB prices of petrol, diesel and paraffin increased in the month of September 2021 by 30.56%, 22.04% and 22.54%, respectively when compared to FOB prices which were applied when determining the ruling prices.

Oil prices dropped at the start of the Covid-19 pandemic. In April last year, they fell below zero for the first time in history as lockdown wiped out demand while producers continued to pump crude from their wells. However, demand has been rising in recent months as economies around the world have started to reopen, pushing world oil prices upwards.

The FOB price trend is summarized as follows:

Figure 1: FOB Price Trend

EXCHANGE RATE MOVEMENT

Since the last In Bond Landed Cost (IBLC) review in March 2021, when pump prices were last revised, the Malawi Kwacha has depreciated by 4.52% from an average March 2021 exchange rate of K787.85/USD to the current average exchange rate of K823.49/USD. The Exchange Rate Trend is summarized as follows:

Figure 2: Exchange Rate Trend

PUMP PRICE REVIEW 

MERA assessed the combined effect of the movement of the FOB prices, the exchange rate of the Malawi Kwacha against the United States Dollar, and changes in local factors that determine the maximum pump prices on the landed cost of petroleum products. Due to the above factors, the landed costs of petrol, diesel and paraffin increased as follows:

Table 1: In Bond-landed Cost Changes

According to the Automatic Pricing Mechanism (APM) all the three products qualified for an upward price adjustment since the changes in their landed costs were beyond the ±5% trigger limit.

In the October 2021 price review, the MERA Board has considered the changes in economic fundamentals outlined above and has resolved to adjust upwards pump prices of petrol, diesel, and paraffin in line with the Automatic Pricing Mechanism (APM) effective 10^th October 2021 as follows:    

MERA Board has also observed with concern that although there is a route mix policy that requires importers to bring in fuel according to the following proportions: Beira 50 percent, Nacala 30 percent and Dar es Salaam 20 percent, uplifts from the port of Nacala by rail account for less than 2 percent.

Going forward, to ensure low cost of transportation of fuel, measures will be taken to ensure that at least 30 percent of petroleum products are uplifted by rail through the Nacala port. 

The MERA Board has also noted pump prices ruling within the region as follows:

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

Signed                                                             Signed

Mr. Leonard Chikadya                            Mr. Henry Kachaje

BOARD CHAIRPERSON                         CHIEF EXECUTIVE OFFICER

9^th OCTOBER 2021                                 9^TH OCTOBER 2021