BACKGROUND

Malawi Energy Regulatory Authority (MERA) considered recent 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 decreased in the month of July 2022 by 7.47%, 4.46% and 4.84%, respectively, when compared to FOB prices which were applied when determining pump prices in June 2022.

Oil prices took a downward trend in July mainly due to fears of a global recession that has affected demand and the intervention taken by US Government as they released stocks from their strategic fuel reserves to support the supply side in the market.

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 June 2022, when pump prices were last revised, the Malawi Kwacha has remained relatively stable trading at K1,0367.24 against the United States Dollar.

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 the three petroleum products changed as follows:

Table 1: In Bond-landed Cost Changes

Product Deemed In-Bond Landed Cost-June2022(MK/litre) Actual In-Bond Landed Cost-August 2022 (MK/litre) % Change
Petrol 1,186.33 1,112.00 -6.27%
Diesel 1,121.12 1,161.25  3.58%
Kerosene    900.38    935.55  3.91%

According to the Automatic Pricing Mechanism (APM) only petrol qualified for a downward price adjustment since the change in its landed cost is beyond the ±5% trigger limit.

Therefore, the MERA Board has resolved to adjust downwards pump price of petrol, effective 6th August 2022. Diesel and paraffin pump prices have been maintained.

The new pump prices are as below:

Product Ruling Pump Price (MWK/litre) Recommended Pump price (MWK/litre) % Change
Petrol 1,999.00 1,946.00       -2.65
Diesel 1,920.00 1,920.00        0.00
Kerosene 1,261.00 1,261.00        0.00

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

Signed

Reckford Kampanje

BOARD CHAIRPERSON

5th August 2022