By CHATULA KANGALI –
ZAMBIA has in the recent past continued to witness upward adjustments in the pump price of fuel on the local market, a situation that has raised concern among consumers, producers and other stakeholders.
The increase has resulted in an increase in the prices of goods and services as well as transportation costs.
Among other factors, the increase in the fuel pump price has been as result of the removal of fuel subsidies to enable the Government channel the money to other social sectors.
The increase has also been as a result of the volatility in the prices of fuel on the international market and the exchange rate of the Zambian Kwacha against other convertible currencies.
Fuel is an important product that plays a critical role in the growth and development of the country as it runs the wheels of the economy.
This commodity has made life easy both at domestic and industrial level in the transportation of goods and services, and energy generation, among other uses.
The petroleum industry makes up between 4.6 and 6.5 per cent of the global economy.
In Zambia, the petroleum industry contributes to the Gross Domestic Product (GDP) growth and has created employment and business opportunities for the locals in supply, transportation and retailing of the commodity.
The petroleum industry currently consists of a pipeline, refinery, storage, transportation and marketing.
Zambia currently imports 100 per cent of its entire fuel requirements which include diesel, petrol, kerosene, JTA1 and Liquid Petroleum Gas (LPG) among others.
The pricing of petroleum products is influenced by the volatility of international oil prices and the exchange rate.
Fuel terminal fee, excise duty, dealer margin fees and Energy Regulation Board (ERB) fees, strategic reserves fund and Value Added Tax (VAT) are the major taxes and fees that influence the price of fuel.
The pricing of fuel is determined by the ERB through the use of the Cost Plus Method (CPM).
Currently, the pump fuel price of gasoline has hit an all-time high and is selling at K27.22 per litre while that of diesel is K29.25, kerosene, K22.29 and JTA1, 25.34 per liter.
In the month of February, this has been the highest and ERB has attributed the increase to the international oil prices which have increased from $78 per barrel in the month of January to $87 per barrel in the month of February.
The increase has been attributed to optimism about the rising travel demand for China’s re-opening of its economy and continued sanction on Russian products, among others.
Consumers have been complaining that the current prices are high and contributing to the high cost of living and doing business.
ERB board chairperson Reynolds Bowa says the fuel prices were volatile on the international market and the trend for fuel prices in Zambia has been an upward increase for the past one year.
To address the high cost of fuel, spur economic growth and reduce the cost of doing business, the government has put in place interventions to stabilise the price of fuel on the local market.
One of the interventions is the use of the Tazama pipeline to transport imported diesel as a finished product.
According to Energy Minister Peter Kapala, the use of the pipeline is the cheapest way of bringing fuel into the country.
“As you know, inland transportation is the most expensive way of delivering fuel into the country. The fuel we currently consume as a country is delivered constantly by road, making it expensive. The cheapest is the use of the pipeline and we are taking aggressive steps to achieve this,” he said.
Mr Kapala says the country will start blending ethanol with petrol in a bid to reduce the price of petrol.
In the next three months, Zambia is expected to start blending ethanol with petrol with two companies in Lusaka on a pilot project.
Mr Kapala said the blending of ethanol with petrol was another measure the Government was using to reduce the price of the commodity.
The Minister added that the Government would use the petrol that would come from the Zimbabwean pipeline to blend with ethanol.
He said the Government was segmenting the delivery of petrol in the country to make it cheaper, adding that the cost of transportation would be reduced.
Mr Kapala said petrol that comes into the country through Chanida border would be distributed and supplied to the eastern part of the country.
Government will use the pipeline from Zimbabwe to deliver petrol to the southern part of the country.
Mr Kapala said Government was working hard to reduce the price of fuel in a quest to reduce the cost of doing business.
He says the intervention by the Bank of Zambia (BoZ) to stabilise the kwacha would also help improve the price of fuel.
With such measures being put in place by Government and cooperating partners, it is hoped that the country will manage to solve the problem of high fuel pricing.
Affordable fuel prices can reduce the cost of living and doing business, thereby contributing to economic development, job creation and poverty reduction.