REVIEW OF PRICES OF PETROL, DIESEL AND PARAFFIN FOR THE MONTH OF JUNE 2022

BACKGROUND

Malawi Energy Regulatory Authority (MERA) considered recent alignment of the Malawi Kwacha exchange rate against major trading currencies and trends in the world petroleum products prices and their impact on energy prices.

PETROLEUM PRODUCTS INTERNATIONAL PRICES

The average FOB prices of petrol, diesel and paraffin increased in the month of May 2022 by 13.80%, 6.0% and 5.0%, respectively when compared to FOB prices which were applied when determining pump prices in April 2022.

Oil prices maintained an upward trend 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 producer and under trade sanctions.

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 April  2021, when pump prices were last revised, the Malawi Kwacha has depreciated by 25% trading at K1.031.25 against the United States Dollar. This followed alignment of the exchange rate to parallel market rates announced by the Reserve Bank of Malawi on 26^th May 2022.

The Exchange Rate trend since May 2021 is as presented below:

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 far beyond the ±5% trigger limit.

The Authority, in reviewing pump prices for June 2022, also considered the following; reinstatement of the Rural Electrification Levy that had been suspended to moderate the April 2022 pump price adjustment; introduction of a “finance charges” line in the price build up to cover costs that importers are incurring in obtaining imports financing and introduction of “IBLC Loss Recovery” line to allow collection of importation losses that have accumulated due to the increasing FOB prices on the world market and high cost of financing fuel imports in previous months.

Therefore, the MERA Board has resolved to adjust upwards pump prices of petrol, diesel, and paraffin effective 23^rd June 2022 as follows:

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

SIGNED

Reckford Kampanje

BOARD CHAIRPERSON

22^nd June 2022