The Energy Regulation Board-ERB has clarified that the international oil prices and the exchange rate of the Zambian Kwacha against the United States Dollar are the major determinants of domestic fuel prices in Zambia.
Oil Marketing Companies Association of Zambia (OMCAZ) had earlier questioned the fuel pricing model that the ERB is using to come up with the monthly fuel pump prices because the fuel pump price for a particular month was adjusted upwards when the price of crude oil on the international market was coming down.
ERB Public Relations Manager Namukolo Kasumpa said when pricing fuel in Zambia the ERB considers the performance of these two key factors that affect the price of fuel adding that each month, these two factors are monitored and analysed and if they move in tandem and increase or decrease then the local price of fuel is affected accordingly.
In response to a query from the Zambian Business Times-ZBT, Kasumpa added that if the two move in opposite directions, the greater effect by either of the two is what matters most noting that other factors that are considered include the changes in taxes, fees and or levies/duties.
Kasumpa explained that for each monthly fuel price review, the local price of fuel is only adjusted if, the resultant change in the price of fuel locally, (whether increase or decrease) is more than 2.5% adding that if the price change falls below the 2.5% threshold then the fuel prices will not be changed.
She noted that the ERB continues to use the Cost Plus Model (CPM) to determine the wholesale and pump prices for petroleum products.
Kasumpa said the underlying assumption of the CPM is that the final price of petroleum products should cover all the costs incurred in the supply chain of fuel and this is done in order to ensure that fuel prices are cost reflective to raise adequate revenue for sustainable security of supply.
She reiterated that all petroleum products or fuel is imported into the country, as Zambia does not produce its own oil yet and this fuel is bought off international markets and is priced in US dollars.
