THE ENERGY REGUALTION BOARD SHOULD WAIT

On 14^th October the Energy Regulation Board adjusted upward the price of fuel attributing the increment to the volatility of the Kwacha against the United States dollar since the last price in July 2015.

You needed to have between 9.8975 kwacha to 9.9442 roughly below 10 kwacha to buy one United States dollar.

A litre of Petrol was 13 kwacha 70 ngwee up from 9 kwacha 87 ngwee while a litre of Diesel will now cost 11 kwacha 40 ngwee from 8 kwacha 59 ngwee.

Yesterday the same Energy Regulation Board reduced the pump price of all petroleum products by 1 kwacha 20 ngwee for petrol and 1 kwacha 30 ngwee for diesel citing what is called fundamentals such as the exchange rate.

According to the Bank of Zambia today’s exchange rate 9.9384 buys 1 United States dollar still less than 10 kwacha like it was three Months ago when the price of fuel was increased by 35 percent.

Analysis

Motorists will benefit from this drop and not Consumers and for Oil Marketing Companies, this drop is not unlikely to make any impact due to other costs of doing business such as paying for Toll fees, salaries as was as operational costs.

Don’t expect a reduction in bus fares because the justification given by The Energy Regulation Board cannot be relied upon because the global market oil prices hit a 18-month high on the first trading day of 2017 yesterday.

This situation is likely to force the Energy Regulation Board to fail to sustain the price reduction much further as the year progresses. 

In short, there is no predictability though on part of the government it is a bond decision that has also not being explained clearly.

The same Patriotic Front administration has a policy to allow Private Oil Marketing Companies to supply finished oil products on the Local Market and The Ministry of Energy is on record saying the Energy Regulation Board will still retain the power to regulate prices.

This will be difficult to attain without strict measures in place because Private Oil Marketing Companies are in the business of making profit and they want consistency, predictability.

Issues of Compliance will be encountered where the price of Fuel across the Nation maybe different from one location to the other depending on the source.

Can the Energy Regulation Board sustain this drop as the year progresses, this is something that is impossible to predict at the moment.

It is good for others today but on the other side it is not something to throw in the towel and make drastic changes because you make wake up tomorrow finding the price is hiked by more than One Kwacha.