By Victor Ngoma, MBA
Head-Energy & Power Development
Movement for Economic Emancipation (MEE)
On October 2nd, 2018, Zambian Energy Regulation Board (ERB) Chairman, Mr. Raymond Mpundu announced nationwide upward fuel price adjustment stating that the “[crude]oil prices have increased on the international market”.
Whilst that could be a valid reason for any government to adjust the fuel prices, The Movement for Economic Emancipation (MEE) and other responsible entities, were at variance with the reason stated for the increase and issued a statement challenging the rationale behind the upward adjustment of the commodity at the pump.
MEE’s stated reason for challenging the government for this price upward adjustment, at the time, was that “it was not the first time the Zambian government had given this questionable explanation to justify the increase on fuel prices”.
MEE further stated and explained that according to the Energy Information Administration (EIA), there is still an abundance of Crude Oil Commodity inventory around the world, despite the upward adjustment in Crude Oil Commodity we have seen (in Zambia) lately.The successes of improved crude oil extraction technologies in horizontal drilling and fracturing is the reason we have an abundance of the commodity in inventory.
Though we continue to experience rapid fluctuations in the pricing and an occasional upward spike resulting from geopolitical imbalances, these fluctuations are widely believed to be non-sustaining and are easily countered by the supply abundance.MEE also believes that the government should be justified to make needed price adjustment in those circumstances.However, what the Zambian government has not been known to do was making those similar downward price adjustments when the Crude Oil Commodity price on the global market adjusts in the downward direction.
According to Bloomberg News – Commodity Markets (Energy), in the months of October and November alone, the Crude Oil Commodity on the global market has plunged from the high of $86.29 per barrel on October 3rd, 2018 to a low of $58.71 as of November 30th, 2018 on the Brent Benchmark (there are 42 gallons in a barrel).This drop alone represents a remarkable $27.58 per barrel or 32% plunge in the Crude Oil Commodity.
MEE conducted a representative survey, around the world, on fuel pump prices and the indication is that there is a corresponding downward price adjustment from around the world due to this declining Crude Oil Commodity on the global market.MEE would like to appeal to ERB and its Chairman, Mr. Mpundu, and the Zambian PF government to give a fuel price break to the citizens of Zambia as we go through economic challenges.
We believe and are ready to challenge the ERB argument that the current crude oil feed was purchased previously.Unless the ERB is willing to reduce the price of fuel in the next few days, that argument is of no consequence.
We believe that the Zambian government sources its Crude Oil Commodity from the same place where the majority of countries source its feed.It is therefore disingenuous on the part of ERB to not reduce the fuel prices accordingly.We would also urge the ERB to consider hedging strategies at these low prices to ensure the stability of fuel prices in the country.
As a citizen led movement, MEE echoes the voices of millions of all of us ordinary Zambian citizens appealing to the PF government to extend the benefits of these sustained reduction in world crude oil prices to us.
We desperately need an expenditure break in these very economically challenging times.