PF LEFT WITH NO OPTION BUT TO “ADJUST FUEL” PRICES UPWARD
According to Zambian Observer,
Crude oil prices have broken through the $80 per barrel mark reaching an all-time high in the last 4 years. This is not good news for oil importing countries especially African economies with currencies which are relatively weak at the moment according to the ENERGY FORUM ZAMBIA.
FORUM Chairman, Johnstone CHIKWANDA, has observed that from an expert opinion point of view, it is highly likely that regulators will soon be left with no option but to adjust pump prices upwards if things remain like this.
Consumers must always track the price trajectory of crude oil and the exchange rate.
“These are the dominant forces which drive the fuel price although either of them can dictate the direction of the fuel price depending on its magnitude. The South African Rand has faced challenges and weakened against other major currencies leading to fuel price increases of late” said Mr. CHIKWANDA.
The Zambian kwacha has faced similar challenges of late and so are many African currencies. “If you have a weakened currency on one hand and a spiked crude oil price on another hand, consumers have no chance of surviving those exogenous factors.
The pump price will have to go up unless government opts to slide into subsidies.”
But how soon they get adjusted is a matter of national policy. In some countries such as South Africa, prices are reviewed every month, while in Zambia, it’s about 45 days.
“We are fortunate in Zambia in that while a number of countries in the region have been increasing fuel prices this year, Energy Regulation Board (ERB) only increased the price in February, 2018. This is because the Zambian Kwacha has been relatively stable until recently.
With most fuel subsidies removed, consumers are encouraged to rethink their planning” he said.
He said that fortunately in Zambia, price review takes place almost after two months while in some countries including South Africa, pump price reviews are conducted every month otherwise with conditions like this, new pump prices are just outside the skin.
“What is happening is that there is a reducing supply of oil from Iran and that bigger oil producers such as Saudi Arabia and Russia are expected to step in, increase their supply and close the delta (gap) but both Saudi Arabia and Russia have refused to increase their supplies into the global market” he said.
You can make it very big in a short period of time but you can also get ruined in a very short space of time. Commodity traders live a knife edge. Things can happen very fast.”
The US has imposed sanctions on Iran which will take full effect November 2018. By the time these sanctions get implemented, we expect more reductions of crude oil supply from Iran on the global market.
The gap being left behind by Iran must be filled by someone such as Saudi Arabia or Russia but these big guys have so far declined calls to step in. This will definitely push the price of crude oil higher and could take us to $90 per barrel by end of 2019. This is not a good sign of things ahead.
The Organisation of Petroleum Oil Exporting Countries (OPEC) met on Sunday in Algiers, Algeria but could not reach consensus on who should increase supplies in order to counter the falling production from Iran.
If this stalemate coupled with other wicked forces in the global market place continues, the crude oil price could rapidly increase, squelch growth and reverse some of the gains which have been made in some countries.
Crude oil prices have broken through the $80 per barrel mark reaching an all-time high in the last 4 years. This is not good news for oil importing countries especially African economies with currencies which are relatively weak at the moment according to the ENERGY FORUM ZAMBIA.
FORUM Chairman, Johnstone CHIKWANDA, has observed that from an expert opinion point of view, it is highly likely that regulators will soon be left with no option but to adjust pump prices upwards if things remain like this.
Consumers must always track the price trajectory of crude oil and the exchange rate.
“These are the dominant forces which drive the fuel price although either of them can dictate the direction of the fuel price depending on its magnitude. The South African Rand has faced challenges and weakened against other major currencies leading to fuel price increases of late” said Mr. CHIKWANDA.
The Zambian kwacha has faced similar challenges of late and so are many African currencies. “If you have a weakened currency on one hand and a spiked crude oil price on another hand, consumers have no chance of surviving those exogenous factors.
The pump price will have to go up unless government opts to slide into subsidies.”
But how soon they get adjusted is a matter of national policy. In some countries such as South Africa, prices are reviewed every month, while in Zambia, it’s about 45 days.
“We are fortunate in Zambia in that while a number of countries in the region have been increasing fuel prices this year, Energy Regulation Board (ERB) only increased the price in February, 2018. This is because the Zambian Kwacha has been relatively stable until recently.
With most fuel subsidies removed, consumers are encouraged to rethink their planning” he said.
He said that fortunately in Zambia, price review takes place almost after two months while in some countries including South Africa, pump price reviews are conducted every month otherwise with conditions like this, new pump prices are just outside the skin.
“What is happening is that there is a reducing supply of oil from Iran and that bigger oil producers such as Saudi Arabia and Russia are expected to step in, increase their supply and close the delta (gap) but both Saudi Arabia and Russia have refused to increase their supplies into the global market” he said.
You can make it very big in a short period of time but you can also get ruined in a very short space of time. Commodity traders live a knife edge. Things can happen very fast.”
The US has imposed sanctions on Iran which will take full effect November 2018. By the time these sanctions get implemented, we expect more reductions of crude oil supply from Iran on the global market.
The gap being left behind by Iran must be filled by someone such as Saudi Arabia or Russia but these big guys have so far declined calls to step in. This will definitely push the price of crude oil higher and could take us to $90 per barrel by end of 2019. This is not a good sign of things ahead.
The Organisation of Petroleum Oil Exporting Countries (OPEC) met on Sunday in Algiers, Algeria but could not reach consensus on who should increase supplies in order to counter the falling production from Iran.
If this stalemate coupled with other wicked forces in the global market place continues, the crude oil price could rapidly increase, squelch growth and reverse some of the gains which have been made in some countries.