Africa-Press – Zambia. ECONOMIST Lubinda Haabazoka says the tension in Ukraine cannot be the reason for the increase in fuel pump prices because the country has not yet seen unfavourable movements in fuel prices.
On Monday, the Energy Regulation Board (ERB) increased the pump prices of petroleum products by K2.12 per litre for petrol and K2.61 per litre for diesel, while the price for kerosene has remained unchanged.
“The upward adjustment in prices is inevitable to ensure the sustained supply of fuel to the Zambian market in the short to medium term. Notably, there has been a steady rise in international prices of petrol and diesel recorded throughout the month of January into February 2022. This has had a major impact on local fuel prices, with the price of both imported products rising above the US $100 per barrel mark,” said ERB chairperson Reynolds Bowa. “As has been reported, the supply disruptions being experienced on account of the ongoing geopolitical tension between Russia and Ukraine have had an immediate adverse impact on oil prices. Further, compounding this was the continued depreciation of the kwacha against the United States dollar, between the last price adjustment in January 2022 to mid-February 2022.”
But Dr Haabazoka says there is a reason why oil prices were being adjusted every three months and not the 30-day review period introduced by the Energy Regulation Board. He argued that the Russia-Ukraine conflict could not be the reason for ERB to raise the pump prices of petroleum products.
“I think that Ukraine for now cannot be the reason for the increase in fuel because we have not yet seen any unfavourable movement in oil prices. I think that there is reason why oil prices were being adjusted every after three months. One of the functions of government in an economy is to perform the stabilisation function. Meaning government should stabilise the economy. Meaning energy is one of the most important input not just in production, but also in the input of households,” Dr Haabazoka said.
He has since predicted a continued rise in the prices of goods and services due to the 30-day review period of fuel pump prices. Dr Haabazoka explained that the policy would cause uncertainty in business thereby causing businesses to overprice goods and services in fear of making loses.
“So for there to be certainty or predictability, fuel prices are supposed to be stable for a long period of time. [There are] mechanisms that government can use without subsidising oil and keep fuel prices stable for longer periods. What is happening now is that fuel prices are going up, down-up-down. So businessmen because they need stable prices of goods, are going to overprice the goods. They are going to overprice their goods and services so that any movement in the prices of fuel is cushioned and they don’t make loses,” he warned.
“The challenge with that is that even when fuel prices go down, they will never adjust their prices downwards. And in an event that fuel prices again go up, they will increase the prices of goods and services because that is the nature of business. The nature of business is to make profit. Because of uncertainty, because they do not know what the prices of fuel would be tomorrow, there is going to be a risk. Uncertainty creates those risks. So in order to manage that risk, give both monetary and non-monetary risk management methods to manage the risks. That comes with a cost that is going to be passed on to the consumer.”
Dr Haabazoka said it was clear that the new daw administration wants to do everything different from what PF did but that they should realise that “this is not about PF”.
“We know that you want to do things differently from the way the previous regime did things. There are mechanisms that I cannot mention because I am now a consultant. But there are mechanisms that we can employ to make sure that without the government having to get out money from the coffers, we are able to ensure fuel pump price stability for a long time,” said Dr Haabazoka.
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