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CAMA, MERA jointly train Malawi journalists on petroleum pricing trends amid Covid-19 spike

John Kapito: CAMA Executive Director

BLANTYRE-(MaraviPost)—Journalists drawn from different media houses in the country were on Monday updated on the trends on petroleum pricing by Consumers Association of Malawi (CAMA) in collaboration with Malawi Energy Regulatory Authority (MERA) as the countries across the world are still feeling the negative  impact of Covid-19 spike.

The novel coronavirus, which Chinese authorities first reported to the World Health Organization (WHO) on December 31, 2019, has been confronting the petroleum exporting countries with both a negative supply and demand shock resulting in fluctuation of petroleum of prices.

For the past few months, Malawi has been witnessing a decrease in petroleum prices following a plunge in oil prices on the international market, a situation which was attributed to the continued spread of Covid-19 which has led to a global slow-down of economic activities which has depressed the demand against the supply of oil.

The decline in oil demand has been particularly significant as oil is mainly used in the transportation sector, and business closures, declines in domestic and international travel, and the lockdowns and quarantines in many countries have all shrunk the demand for oil.

However, as countries continue lifting travel bans, it is projected that prices of oil on the international market will soon start increasing due to a boom in demand as the transport sector, the main user of petroleum, will resume operations.  

It is against this background that CAMA in collaboration with MERA thought it proper and necessary to update the country’s journalists on the trends on petroleum pricing amid Covid-19 by organizing a one-day workshop.

During the workshop, which took place at Mount Soche Hotel, CAMA executive director John Kapito challenged journalists to do more research on petroleum pricing so as to make sure that Malawians get the right information

Kapito lamented the tendency of journalists who take pleasure in writing stories about fuel hike without giving proper background on the same.

“There has been a tendency of ignoring the fuel prices reduction among many journalists in the country. When MERA reduces pump prices it’s not news. It is only news when prices go up. This is bad.

“As journalists you must be equipped with factors that necessitate fuel price adjustment. That is why today we are here together with MERA secretariat to discuss the issue of fuel pricing as we are confronting the Covid-19 pandemic which has also hit our economy hard.

“To have an in-depth understanding of how the market is operating and convey messages to the masses accordingly, journalists should be aware of the trends on the international market,” Kapito said.

Kapito said the prices of fuel in Malawi are also affected by the routes that are used to import the commodity.

He noted that 50 percent of the commodity come into the country through Dar-es-Salaam, 30 percent through Beira while 30 percent is comes through Nacala.

“At the moment we are using expensive routes like Beira and Dar-es-Salaam. It could have been cheaper if we were importing a greater percentage of fuel through Nacala,” he said.

Taking his turn, MERA’s Director of Economic Regulation Chimwemwe Dunkalo said the reduction in fuel prices in the past months was due to stability of Kwacha and sharp decrease in demand for the commodity as people were not travelling, business shut down and low production.

“MERA assessed the combined effect of the movement of the FOB prices and exchange rate of the Malawi Kwacha to the United States Dollar as well as changes in local factors that determine the maximum pump prices. For instance, in May this year it was noted that the landed costs of petrol, diesel and paraffin decreased by 37.50%, 19.89% and 41.49%, respectively and that according to the Automatic Pricing Mechanism (APM) all the three products qualified for a price adjustment since the changes in their landed costs were beyond the ±5% trigger limit,” said Dunkalo.

Dunkalo said while fuel pricing mechanism is a complex issue, journalists have a role to interpret the trends for easy relaying of information to consumers.

“It is up to the media to look for information. The prices are reviewed every month and that is where the media could generate more questions for the benefit of the audience,” said he.

Dunkalo also said MERA uses Price Stabilization Fund to help fuel importers to remain in business otherwise they could be forced out business or the prices would go higher beyond Malawians’ reach.

He said MERA requires at least K5 billion in form of stabilization fund to cushion fuel importers against loses when the prices changes on the international market do not reach ±5% trigger limit in respect to Automatic Pricing Mechanism.

This year only, MERA has revised fuel prices downwards three times.

However, the cost of transportation has remained constant high due to minibuses and buses capacity reduction as one way of containing the Coronavirus.

Chimwe Dunkalo: MERA’s Director of Economic Regulation

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