Update on the Landed Costs of Petroleum Products
The Malawi Energy Regulatory Authority (MERA) is mandated to determine prices of energy sales and services. Key factors that affect the landed costs of petroleum products are the Free on Board (FOB) prices of refined petroleum products on the international market and the exchange rate of the Malawi Kwacha against the United States Dollar (USD).
Since the determination of the ruling pump prices in October 2021, the Malawi Kwacha has slightly depreciated against the United States Dollar by 0.12%, from an average of K823.49/USD to the current average of K824.48 /USD. On the other hand, FOB prices of Petrol, Diesel and Paraffin have increased by 7.15%, 14.87% and 15.99% respectively.
The combined effect of the performance of the key determinants may result in higher landed costs of petroleum products in the month of February 2022. To date, the landed costs of Petrol, Diesel and Paraffin have increased by 6.04%, 13.35%, and 13.91% respectively.
As at 25th January 22, the Price Stabilisation Fund (PSF) balances for Petrol, Diesel and Paraffin averaged K0.9 billion against the recommended minimum of K5 billion.
Under the Automatic Fuel Pricing Mechanism, pump prices qualify for an adjustment when the landed costs of petroleum products move beyond the ± 5% trigger limit. In the upcoming energy price reviews, MERA will consider the following: changes in landed costs; the PSF status; the need to enable importing companies to recover importation costs; and the goal of promoting consumers’ interests with respect to fuel prices and continuity of supply.
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