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 the month of April 2022, average Free on Board FOB prices of diesel and paraffin increased by 4.71% and 0.44% respectively on the other hand, average (FOB) prices of Petrol decreased by 2.25% when compared to the average prices obtained in the month of March 2022, used in determining the ruling pump prices.

Diesel prices continue to skyrocket due to fears of security of supply and global supply chain disruption following the invasion of Ukraine by Russia. Economies have resorted to stock building in fear of supply disruption from the war thereby increasing the demand of oil globally.

The FOB price trend is summarized as follows:

Figure 1: FOB Price Trend

EXCHANGE RATE MOVEMENT

The Malawi Kwacha has remained stable against the USD since March 2022 trading at MK825.00 to $1.00. 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-April 2022(MWK/litre) Actual In-Bond Landed Cost-May 2022 (MWK/litre) % Change
Petrol 838.14 842.97 0.58%
Diesel 909.47 973.13 7.00%
Kerosene 802.28 810.55 1.03%

According to the Automatic Pricing Mechanism (APM), Diesel qualified for an upward price adjustment since the change in the landed cost was beyond the ±5% trigger limit whereas Petrol and Paraffin did not qualify for the price revision as the changes in landed cost were within the ±5% trigger limit.

The Board noting the marginal movements in oil prices on the world market and that Price Stabilisation Fund (PSF) collections in the month would ably cover any cost differences resolved to maintain fuel pump prices until the next review in June 2022.  

The Board further considered the adjustment of industry margins following an assessment of the oil business operating environment and its impact on the licensed operators. The adjustments have been implemented through the PSF in order to maintain the pump prices.

Pump prices for petrol, diesel and paraffin for the month of May 2022 have been maintained as follows:

Product Ruling Pump prices in MWK/litre Recommended pump prices in MWK/litre % Change
Petrol 1,380.00 1,380.00
Diesel 1,470.00 1,470.00
Kerosene    956.00    956.00

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

Signed

Reckford Kampanje

BOARD CHAIRPERSON

7th May 2022