REVIEW OF THE RETAIL PRICE OF LIQUEFIED PETROLEUM GAS (LPG) IN THE MONTH OF MAY, 2018.

BACKGROUND

Malawi Energy Regulatory Authority (MERA) considered recent trends in the world petroleum products’ prices and changes in other macroeconomic fundamentals in the local market and their impact on energy prices.

LPG PRICES ON THE INTERNATIONAL MARKET

The average Free On Board (FOB) prices for Liquefied Petroleum Gas (LPG) increased in the month of April 2018 when compared to the price observed in the month of July 2017 which formed the basis of the current retail price of LPG. The average FOB price increased by 2.85% from R8.77/kg to R9.02/kg. Due to a disruption of production and supply  of LPG by contracted suppliers, Sasol and Engen refineries in South Africa , LPG importers have resorted to alternative suppliers which has resulted in an increase in the transportation cost by 103.77%. This has impacted the landed cost of LPG in the month of May 2018.

EXCHANGE RATE MOVEMENT

Since the last price revision in August, 2017, the Malawi kwacha has depreciated against the South African Rand from K56.53/ZAR to K58.86/ZAR representing a 4.12% loss in value.

 RESULTANT RETAIL PRICE

MERA reviewed the combined effect of the movement of the LPG FOB prices, exchange rate of the Malawi Kwacha to the South African Rand and the increase in the freight cost of LPG and noted that the landed cost of LPG increased by 25.50%. Under the Automatic Pricing Mechanism, LPG qualified for a price adjustment since the change in landed cost went beyond the ±5% band.

In line with the Automatic Pricing Mechanism, the price of LPG qualified for a 10.89% increase. However, the Board resolved to partly cushion the effect of the increased landed cost by applying the LPG Price Stabilization Fund (PSF) and thus resolved to revise upwards the retail price of LPG by 7.29%.

The maximum retail price of LPG has therefore been adjusted upwards effective 11th May, 2018 as presented below:-     

             

Current Maximum LPG Retail Price (MWK/Kg)

Recommended Maximum LPG Retail Price (MWK/Kg)

% Change

           2,076.02

           2,227.34

 7.29

 

All operators are required to sell LPG at a price not exceeding this maximum retail price.

 

SIGNED

 

Rt. Rev. Dr. J.P. Bvumbwe

BOARD CHAIRPERSON

MALAWI ENERGY REGULATORY AUTHORITY

10th May, 2018