• Two variables that are key in determining the pump price of fuel are the exchange range and oil prices on the international market.
• International oil market prices dropped by a minimal margin compared to previous months.
• The Kwacha has depreciated by an average of about 2.8 percent to 3 percent in the previous month.
An Economist says an increase in fuel pump prices was highly anticipated because the cost of crude oil on the international market has only reduced by a small margin.
Speaking to Money FM News, Emmanuel Zulu noted that international oil market prices dropped by a minimal margin compared to previous months, hence it should not be exaggerated.
Mr. Zulu also noted that during last month’s review by Energy Regulation Board (ERB), the fuel pump price was around US$85 per barrel, but it is now fluctuating between a minimal margin of US$75 and US$80 per barrel.
“I did not expect a decrease of course owing to the fact we had two variables that are key in determining the pump price of fuel that we were observing and that is the exchange range and crude oil prices on the international market. Looking at these two variables, we take note that international market prices for oil are actually dropping and they have dropped by a small margin, let’s not exaggerate, they have dropped by a small margin compared to previous months.”
“That month when the adjustment was being made, you will be interested to know that the pump price was around US$85 per barrel, today we are talking about between US$75 and US$80, US$81, its still fluctuating between there so you can see that the margin isn’t much,” Mr. Zulu noted.
He further observed that the Kwacha has depreciated by an average of about 2.8 percent to 3 percent in the previous month, and the net effect is positive even for ERB to effect an upward adjustment in prices of petroleum products.
“So the net effect is actually positive even for the ERB to effect an upward adjustment. That just shows you that the depreciation of the currency has overridden the decrease in fuel price and that has resulted in the net effect of having an increase of the pump price of fuel by those margins,” he added.
Energy Regulation Board (ERB) has adjusted upwards fuel prices for December, 2022 by K1.58 ngwee per litre for Petrol, K1.22 ngwee per liter for Kerosene, and K1.45 per litre for Jet A1 fuel at Kenneth Kaunda International Airport, while the price of low Sulphur diesel remains unchanged.
Board Chairperson Engineer Reynolds Bowa attributed the increase to uncertainties of crude oil prices on the international market and depreciation of the Zambian Kwacha against the United States dollar.
Engineer however said there are several steps that Government has taken to cushion fuel prices on the local market such as the construction of an oil pipeline from Tanzania to Ndola.