MINISTRY of Energy Permanent Secretary Trevor Kaunda says government is still analyzing whether or not any possible fuel price adjustments will be made in view of the fluctuating oil price on the international market, which has dropped to a five-year low.
Oil prices on the international market have plummeted to US $28.73 per barrel of Brent Crude, a five-year low, compared to nearly US $60 just one month ago.
Prices of the commodity have dropped in the wake of the deadly Coronavirus outbreak, which had triggered drastically reduced demand for oil, while supply remained constant amidst a volatile Russia-Saudi Arabia oil price war.
Commenting on the global development, Kaunda said that government was still analyzing the implications of the international oil prices in relation to any possible fuel price adjustment locally as there were still several factors to take into account.
“There is a (Cost Plus) model that is used under ERB. I think first of all, you need to appreciate the procurement of petroleum products. So, even the current pricing of the international market is taken into account in arriving at the decision. What we do is that under the Energy Regulation Board (ERB), we have got what we call the pricing model, which will review the fundamentals and then they advise what to do at the time. So, we are still analyzing the issue as there are several parameters that go into that pricing model. The exchange rate also, is one of the factors that is taken into account in the model. We will take in all the fundamentals into account at a time at the appropriate pricing,” Kaunda said in an interview.
He said government was also discussing with suppliers on how they could take advantage of the cheap oil prices to pass on the benefits to ordinary Zambian consumers.
“As government, we have contracted suppliers to bring in orders, it takes a while from the date of purchase to the date of delivery; it takes in a period of 60 days; in some cases 90 days to get through. When we procure today, it will take time for the product to arrive in the country. What we purchase at this price will be delivered in the next 30 to 60 days. That said, when discussing the challenges, this is how it has disadvantaged the current international oil prices and passing them over. We consider how we can pass that on to the Zambian public once that products arrives,” said Kaunda.
“Even if we procured, now, what will procure now will arrive in two months or three months down the line; what we are receiving today was bought two, three months ago. We are always procuring. We have got suppliers to government and they are always bringing by road road, by Dar es Salaam. We are also discussing with our suppliers on how they can take advantage of procuring that cheaper product on the international market so that we take it into account on the local pricing.”