Malawi: Fuel landing costs go up

Landed costs of fuel have been increasing between October last year and this month, the Malawi Energy Regulatory Authority (Mera) has said.

According to a statement from Mera, landed costs for petrol, diesel and paraffin have increased by 16.16 percent, 24.67 percent and 24.71 percent, respectively.

The determinants of an increase, or reduction, in fuel prices are the exchange rate against the United States Dollar and free onboard prices of refined petroleum products on the international market.

According to the automatic pricing mechanism, prices of fuel are adjusted upwards when landed costs have increased by more than five percent and if they have been compounded by the depletion of reserves in the Price Stabilisation Fund.

“The Mera Board, when instituted, will consider the changes in the landed costs and other economic factors to determine appropriate prices of the petroleum products,” the statement reads.

The statement further indicates that, in October 2021, the landed cost for petrol was K616.09 but it shot to K715.65 per litre this month; the landed cost for diesel was K595.87 in October last year but increased to K742.86 per litre by this month, and; the landed cost for paraffin was K538.22 but has shot to K671.20 per litre by March this year.

Since fuel price adjustments in Malawi last year, petrol is being sold at K1,150 per litre, diesel is being sold at K1,120 per litre whereas paraffin is being sold at K833.20 per litre.

By last week, international media reports indicated that, on the international market, energy prices increased by approximately $10 (approximately K8,250) per barrel, attributing the development to the war between Russia and Ukraine which continues to threaten the global economy.

The Covid pandemic, which also subdued demand for fuel across the globe, has been slowing down, bringing back demand.

Commenting on the development, Consumers Association of Malawi Executive Director John Kapito said the body advocates for gradual increases of fuel prices.

“The price of fuel has been increasing over time. Gradual increases have less impact on consumers than increasing fuel prices at once with a higher margin,” he said.

An increase in fuel prices threatens the growth of the economy as it affects key economic indicators such as inflation, which increases the cost of living.

Economist from the Malawi University of Business and Applied Sciences Betchani Tchereni agreed with Kapito on the need to effect gradual price increases.

He, however, said Malawi does not implement gradual increases because it has mechanisms that help it delay, or sometimes offset, price increases.

“There are many things we can do to cushion the public from these high prices such as revamping our manufacturing industry to decrease over-reliance on imports and removing some levies on fuel to reduce or stabilise prices,” he said.

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