Seventy Dollar ($70/bbl.) Crude, Weak Kwacha has pushed Zambia’s Pump Prices 9% higher

THE ENERGY REGULATION BOARD – ERB in a press release has announced an increase in pump prices by an average of 9.19% effective midnight 12 February. Our analysts reported 3 months ago that pump prices were at risk of soaring higher in light of bullish brent prices on the New York Mercantile Exchange to over $USD68/bbl. then. This was in the wake of consensus among the OPEC nations that had finally agreed to tighten supply in a move that would support oil prices higher to assist crude export dependent nations balance fiscal budgets. Zambia being a net importer was exposed to this to the extent that the cost of importation would swell higher.

Read also: Sixty Three ($63) Crude, Weak Kwacha could push Zambia’s Pump Prices Higher

From last time the ERB increased prices crude price has risen over 15.3% to over $63/bbl. and the Dollar- Kwacha exchange rate has weakened by around 4% to USD9.8/ZMW which breaches the 2.5% adjustment trigger for adjustment purposes.  The ERB announced that petrol will be priced 6.01% higher to ZMW13.75/litre, diesel 8.3% higher to ZMW12.01/litre and Kersone will price 13.17% higher to ZMW8.85/litre. These prices are effective midnight on 12 February 2018.

Brent graph from trading economics showing the Oil price trajectory.

Market Commentary


“This was seen coming especially in the wake of international crude prices that have steadily been edging higher and at some point were almost touching the $USD70/bbl. mark. We projected the hike earlier but due to the lagging effects and the stock that was on hand we can understand the delay by the ERB. A higher cost of fuel precipitates cost push inflationary effects because costs of production and transportation will be expected to be passed on to the consumer in higher charges. Suffice to say inflation is at risk. With consumer price index in check at 6.1% we expect the number to trend higher in the medium term as the market adjusts to the pump price hike.”

Business Times Energy Analyst


 

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