President Peter Mutharika has ordered relevant government ministries, departments and agencies (MDAs) to strategise and develop an action plan to ensure security of fuel supply amid disruptions in the Middle East.
Minister of Finance, Economic Affairs and Decentralisation Joseph Mwanamvekha confirmed in an interview on Monday evening that the President has tasked his ministry, that of Energy and Mining, National Oil Company of Malawi (Nocma), Malawi Energy Regulatory Authority (Mera), Office of the President and Cabinet and Reserve Bank of Malawi (RBM) to devise the plans.
He said government wants to ensure that the country is not affected by the war in the Middle East, which has disrupted traffic flow around the Strait of Hormuz which handles around 25 percent of global crude oil trade.
Alternative pipelines from Saudi Arabia, the United Arab Emirates (UAE) and Iraq roughly handle 10 percent of global oil supply, but could still face disruption if shipments cannot pass through the strait.
Mwanamvekha said it was premature to disclose progress on the measures being put in place to date.
“But normally when the President has made a directive, it is a command and we have to make sure that we implement what our President has said,” he said.
showing the strait’s location. | Getty images
International media outlets, including BBC and Al Jazeera reported that global oil prices reached $114 (about K199 614) per barrel yesterday from $70 (about K122 570) last week due to the joint US and Israel war on Iran.
The increase marked the first time oil has risen above $100 (K175 100) per barrel since Russia’s February 2022 invasion of Ukraine, according to Aljazeera.
Yesterday, The Guardian newspaper of the UK reported that Saudi Arabian State oil firm Aramco warned of an oil market ‘catastrophe’ unless the Strait of Hormuz reopens soon.
The world’s largest oil company described the crisis as by far the biggest the region has seen, but stated that it can reroute 70 percent of exports and tap crude held in storage.
The rapid fuel price increases of as high as 50 percent—is driven by fears of supply disruptions as marine traffic through the Strait of Hormuz has almost ground to a halt amid the war.
According to Al Jazeera, military attacks on vessels and interference with navigation equipment has forced most operators to anchor their ships at the waterway’s edge rather than risk crossing.
With Mera reintroducing the Automatic Pricing Mechanism, which entails that any changes of minus/plus five percent in the value of the kwacha exchange rate to the dollar and free on board prices of refined petroleum products on the international market trigger price reviews either upwards or downwards.
During its last meeting in February, the Mera Energy Pricing Committee maintained the price of diesel at K4 695 per litre and that of petrol at K 4 945 per litre, but increased liquefied petroleum gas price from K3 740 to K4 475 per kilogramme.
Meanwhile, University of Malawi economics lecturer Edward Leman said under the current fuel price modelling framework, persistent increases in global prices would likely trigger an upward revision of domestic fuel prices.
But he noted that Malawi has limited control over global fuel price movements since it does not produce fuel locally and relies entirely on imports.
“Ultimately, easing global tensions and strengthening long-term resilience through improved storage capacity and energy diversification would be key,” said Leman.
In a separate interview, Mzuzu University economics lecturer Christopher Mbukwa said it would be difficult to prevent local fuel price rises under the current mechanism if costs of importing the commodity go up as that would mean controlling the price.
Mera public relations and consumer affairs manager Fitina Khonje previously told The Nation there were sufficient volumes at the ports of Beira, Dar es Salaam and Nacala for supply to Malawi for the foreseeable future.
She further said fuel suppliers were looking for alternative sources that can be utilised as back up.
In December, Nocma said it would import about 412 000 metric tonnes (about 549 million litres) of fuel in the 2026/27 financial year, an equivalent of 60 percent of the country’s consumption.
On the other hand, the Petroleum Importers of Limited, a consortium of private sector oil marketing firms, also issued its tender calling for supplies of about 176 300 metric tonnes (about 200 million litres).
Malawi consumes one million litres of petrol and one million litres of diesel per day, translating to 60 million litres of petrol and diesel per month and 720 million litres of both items per year.
