Petrol pump price down by K200 per litre

Malawi Energy Regulatory Authority (Mera) has reduced the pump price of petrol by K200 or 10.28 percent with effect from today, but maintained prices for diesel and paraffin.

The price reduction means motorists will now pay K1 746 per litre of petrol, down from K1 946 per litre, according to a statement signed by Mera board chairperson Reckford Kampanje.

However, according to the statement, diesel and paraffin prices remain at K1 920 per litre and K1 236 per litre respectively.

Kampanje said Mera assessed the combined effect of the movement of the Free on Board (FOB) prices, the exchange rate against the dollar and changes in local factors that determine the maximum pump prices on the landed cost of petroleum products.

Reads the statement in part: “Under the Automatic Pricing Mechanism [APM], petrol qualified for a downward price adjustment since the change in the landed cost was beyond the plus or minus five percent trigger limit whereas diesel and paraffin did not qualify for the price revision as the changes in landed cost were within the plus or minus five percent trigger limit.”

Kampanje said the average FOB prices of petrol, diesel and paraffin decreased by 17.44 percent, 8.70 percent  and 7.28 percent, respectively, in August when compared to the average prices obtained in July for petrol and May for diesel and paraffin.

He said since the last In Bond Landed Cost (IBLC) review in July for petrol and June for diesel and paraffin, the kwacha has remained relatively stable trading at K1 036.25 against the United States dollar.

The reduction which comes amidst the scarcity of fuel in the country especially diesel, has since drawn mixed views from consumers and analysts, saying it will not fully benefit consumers.

Reacting to the reduction, Catholic University economics lecturer Hopkins Kawaye yesterday said although the reduction would ease the burden faced by consumers, it in a way violates some economic principles.

He said: “When a commodity price goes down at a time when it’s scarce, it simply violates economic principles. If the commodity continues to be scarce, it is the black market which is going to benefit because they would buy it at a cheaper price and sale the same at an expensive price to others. We, therefore, expect it to be available going forward to benefit the wider population.”

Malawi University of Business and Applied Sciences-based lecturer Betchani Tchereni observed that the reduction is insignificant to allow for any notable changes in the economy, especially at a time when fuel is unavailable on the market.

He said: “While we celebrate this marginal decline, the truth of the matter it is insignificant to slow down inflation which is also triggered by the rise or decline of fuel prices.

“On the other hand, most goods in Malawi travel by diesel cars which is unavailable and prices have not moved as such, this reduction would not trigger any positive change as of now.”

On his part, Consumers Association of Malawi executive director John Kapito said the price reduction offers little hope.

He said: “We can only celebrate this reduction with caution considering that it is not much and also given the fact that fuel is becoming scarce on the market.

“On the other hand, previous experience has shown that goods go up when fuel prices rise but do not come down when the price of fuel is reduced.”

Meanwhile, Mera consumer affairs and public relations manager Fitina Khonje, while admitting the erratic fuel supply, highlighted that stakeholders continue to work tirelessly to minimise the supply disruptions.

She said: “We understand that there are fuel supply interruptions caused by limited availability of forex and have affected consumers but efforts are being made to normalise flow of supplies.

“On the other hand, Mera is mandated to regulate the energy sector in a fair, efficient and transparent manner. We have a formular in place and in addition we explain how we arrive at prices. In this case the FOB prices of petrol, aviation fuels and LPG and performance of the kwacha were favourable to warrant price reductions. It therefore would not have been fair to set the prices otherwise.”

Mera adopted the APM in 2012, a means whereby fuel pump prices are adjusted to reflect fuel price movements on the international market while pump price adjustments reflect the changes in value of IBLC of petroleum products and movements of the kwacha against the dollar.

Meanwhile, the average petroleum spot prices per barrel are seen at $94.97 an increase from an average of $48.5 in 2021.