Malawi’s pump prices for petrol and diesel are one of the highest in the world, according to latest data from GlobalPetrolPrices.com, a situation that increases living and operating business costs.
The data, which Business Review has seen, show that as of January 26 2014, the retail prices of diesel in Malawi was $1.56 (K745), while petrol was selling at $1.51 (K721) per litre.
Comparatively, Malawi’s prices for both petrol and diesel are one of the highest in the world, a situation that has been attributed to high transportation costs and taxes, according to the energy experts.
Minister of Natural Resources, Energy and Mining Atupele Muluzi, in an interview on Tuesday, attributed high fuel prices to use of road transport and levies that are embedded in the retail prices.
“I agree that Malawi has one of the highest fuel prices, but this is due to the logistical challenges that we experience as a landlocked country. We rely on road transport, which unfortunately is not cheap,” he said.
Muluzi said to bring down the cost of fuel, government is negotiating with fuel importers to use the railway line.
He said apart from fuel reserves, which are being constructed in the country’s three regions and will stock up to 60 million litres of fuel, government is also looking at constructing a pipeline from the port.
While observing that government is responsible for ensuring lower fuel costs, Muluzi said Malawi Energy Regulatory Authority (Mera) is responsible for the pricing of diesel and petrol.
Mera acting chief executive officer Elias Hausi in an interview said Malawi has high fuel prices because of transportation costs as the country is landlocked.
“Although global fuel prices have fallen by about 50 percent, other transportation costs and taxes have not fallen by the same margin,” he said.
According to GlobalPetrolPrices.com, all countries have access to the same diesel prices on international markets, but decide to impose different taxes, which lead to retail prices being different.
On petrol, the website has explained that as a general rule, richer countries have higher prices while poorer countries and the countries that produce and export oil have significantly lower prices.
Due to falling global petroleum prices by 50 percent in the last six months and the appreciation of the kwacha since December, Mera effected a price cut on diesel and petrol by an average 10 percent on January 11.
Under the new prices, petrol is now selling at K760.40 per litre while diesel is at K785.40 per litre.
Since Malawi re-adopted automatic pricing mechanism (APM) in May 2012, fuel pump prices are adjusted to reflect fuel price movements on the international market to allow fuel importing companies under Petroleum Importing Limited (PIL) to recover importation costs on real time basis.
Pump price adjustments reflect the changes in the value of IBLC of petroleum products and movements of the kwacha against the dollar, according to Mera.
APM operates within a threshold of ±5 percent, which is also the trigger limit, meaning that a change in In Bond Landed Cost (IBLC) of more than five percent will trigger a price adjustment and vice-versa.
To minimise the impact of frequent fuel price fluctuations on the international market, APM was set to operate within a threshold of five percent, which is also the trigger limit.