BACKGROUND

The 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 March 2022 by 45.42%, 70.82% and 66.68%, respectively when compared to FOB prices in September 2021, which were applied when determining the ruling prices.

Oil prices continue to skyrocket due to fears of security of supply following the invasion of Ukraine by Russia. Economies have resorted to stock building in fear of supply disruption from the war, Russia being one of the largest oil producers.

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 October 2021, when pump prices were last revised, the Malawi Kwacha has relatively remained stable trading at K825.00 from K824.48 to the United States Dollar. 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

Product Actual In-Bond Landed Cost-October 2021 (MWK/litre) Actual In-Bond Landed Cost-April 2022 (MWK/litre) % Change
Petrol 616.09 827.86 34.37%
Diesel 595.87 901.01 51.21%
Kerosene 538.22 800.25 48.69%

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 far beyond the ±5% trigger limit.

When reviewing the pump prices in April 2022, the Board in consultation with the Minister of Finance, resolved to minimize the resultant pump prices by reviewing and adjusting some of the levies such as the Malawi Bureau of Standard Cess, Road Levy, Energy Regulation Levy and the Rural Electrification Levy.

Therefore, the MERA Board has resolved to adjust upwards pump prices of petrol, diesel, and paraffin effective 10th April 2022 as follows:    

Product Ruling Pump prices in MWK/litre Recommended pump prices in MWK/litre % Change
Petrol 1,150.00 1,380.00 20.00%
Diesel 1,120.00 1,470.00 31.25%
Kerosene     833.20     956.00 14.74%

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

Signed

Reckford Kampanje

BOARD CHAIRPERSON

9th April 2022