Page 6 - AfrElec Week 19

AfrElec COMMENTARY AfrElec
Fuel price cuts in Malawi, Zimbabwe and Tanzania
Drivers in all three African states are paying less for gasoline and diesel, even as they drive less
AFRICA
WHAT:
Malawi, Zimbabwe and Tanzania have all reduced prices for refined petroleum products
WHY:
The price cuts reflect the recent turmoil on world crude markets
WHAT NEXT:
All three countries will pay less for imported fuel this year, but their savings will not stave off the coronavirus-related economic slowdown
THE global energy industry is still struggling to absorb the impact of the recent decline in crude oil prices. It is not having an easy time doing so, given current conditions.
On the positive side, markets have recovered some ground since April 20, when WTI futures dropped below zero for the first time ever, and demand is expected to recover somewhat in the second half of the year following the lifting of restrictions designed to rein in the spread of the coronavirus (COVID-19) outbreak. At the same time, the supply glut that helped send prices tumbling is likely to dissipate over the next few months, as major producers cut output and exports.
But on the negative side, oil companies still have plenty of reasons to worry. Plunging prices have made a mockery of revenue projections, and many operators have had to cut budgets, reduce the scope of their exploration pro- grammes, postpone developments and trim staff levels in order to remain afloat. They are hoping for better days ahead, but they have no way of knowing when the sector might truly recover.
Nevertheless, the oil industry’s travails have an upside. That is, they offer some benefit to consumers because they make fuel cheaper. This essay will examine reactions to the recent fall in petroleum product prices in several African countries.
Malawi: another cut
Last week, Malawi’s government cut fuel prices for the second time in as many months.
Malawi Energy Regulatory Authority (MERA) announced the latest reductions on May 6, saying that it was bringing maximum wholesale prices for gasoline, diesel and paraffin down to MWK612,060 ($832.60), MWK586,350 ($797.62) and MWK363,260 ($494.15) per 1,000 litres respectively. It also pulled retail price ceil- ings for gasoline, diesel and paraffin down to MWK690.5 ($0.94), MWK664.8 ($0.90) and MWK441.7 ($0.60) per litre respectively.
According to the Nyasa Times, the new pric- ing regime, which was due to take effect on May 8, is likely to draw positive responses from Mala- wi’s motorists. It should also please Vice-Presi- dent Saulos Chilima, who had recently urged
MERA to cut fuel prices again. Last week, Chil- ima argued that the agency’s move to reduce rates in April had not gone far enough, since it only brought prices down by about 13.2% on average, even as crude oil lost a larger share of its value. “This [gap] means that MERA has trans- ferred only half – 50% – of the benefits of the decrease to consumers,” he asserted.
Malawi’s government does appear to be con- cerned, though, that consumers may not notice the effects of the price cuts immediately. Last week, MERA officials said they were asking transportation companies to consider reducing their fares to reflect the drop in fuel costs. As of press time, it was not clear whether their efforts were likely to succeed.
Zimbabwe: more changes
Fuel prices have also gone down in Zimbabwe within the last week. On May 6, Zimbabwe Energy Regulatory Authority (ZERA) set a retail price ceiling of ZWD20.84 ($0.0576) per litre for diesel, down from the previous level of ZWD21.52 ($0.0594). It also capped pump prices for E5 blended gasoline at ZWD21 ($0.0580), down from the previous limit of ZWD21.77 ($0.0602).
ZERA said in a statement that it was giving retail fuel sellers some leeway with respect to pricing. “Operators may ... sell at prices below the cap, depending on their trading advantages,” it noted. “Stakeholders are advised that the petro- leum price releases can be verified on the official ZERA website, Facebook and Twitter handle.”
Eddington Mazambani, ZERA’s acting CEO, was quoted as saying by The Herald that lower oil prices had not been the only factor in his agency’s decision. Officials in Harare also wanted to cut fuel prices to reflect changes in the tariff regime, he said, without elaborating.
Mazambani also said that ZERA might slash fuel prices again, if world oil markets lost more ground. He was speaking around the same time that NewsZimbabwe.com reported that the price cuts would help consumers reduce their day-to- day expenses. The site also noted that motorists have not had to wait long to fill up at Zimba- bwean filling stations lately, since coronavirus has dampened local fuel demand.
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w w w . N E W S B A S E . c o m Week 19 14•May•2020