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 Free on Board (FOB) prices of petrol, diesel, and paraffin (kerosene) decreased by 5.21%,8.74% and 12.16% respectively in the month of October 2022 when compared to the average prices obtained in the month of August 2022 for petrol and May 2022 for diesel and paraffin, used in determining the ruling pump prices.

When compared to the month of September 2022, the average FOB prices increased by 7.67%,6.93% and 2.25% for petrol, diesel, and paraffin respectively. The increase in FOB prices is mainly due to decline in oil supply on the international market due to the Russian-Ukraine and OPEC+ decision to cut production.

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 September 2022 for petrol and June 2022 for Diesel and Paraffin, the Malawi Kwacha official exchange rate has remained stable trading at K1,036.25 against the United States Dollar.

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-(MWK/litre) Actual In-Bond Landed Cost-August 2022 (MWK/litre) % Change
Petrol    962.33    967.59  0.55%
Diesel 1,113.35 1,200.56  7.83%
Kerosene    900.38    923.57  2.58%

According to the Automatic Pricing Mechanism (APM), diesel qualifies for a price revision since the change in the landed cost is above the ±5% band. On the other hand, petrol and kerosene do not qualify since the change in landed costs are within the ±5% band.

Despite diesel qualifying for price revision, MERA Board has resolved to maintain pump prices in the month of November 2022 as implemented on 15th September 2022 until the next review in December 2022 when the projected importation losses shall be assessed and considered for recovery.

Pump prices have, therefore, been maintained as below:

Product Ruling Pump Price (MWK/litre) Recommended Pump price (MWK/litre) % Change
Petrol 1,746.00 1,746.00         0.00
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

11th November 2022