Oil procurement

Government must seriously consider opening the oil procurement process to a wider array of bidders to ensure efficiency, price stability and guarantee of supply.

Most oil marketing companies are traders who procure oil from primary and even secondary processors to supply to Zambia and  in the process add to the price of landed products.

Every effort should be made to get as close as possible to the source of supply to limit middlemen and therefore cut down on handling costs which account for the high prices that are charged in Zambia.

During its recent fact-finding mission to Zambia the International Monetary Fund (IMF) intimated reason would seem to justify that a cost reflective energy pricing scheme must apply to the sector.

The immediate conclusion as equally intimated by the President is an increase in the price of electricity and petroleum products to reflect cost.

However, what is not clear is the quantum of increase considering that Zambia is among the few countries with very high pump prices for all petroleum based products to the extent that some airlines have stopped refueling in Zambia preferring instead to pick fuel in Zimbabwe.

This situation is paradoxical because Zimbabwe has the same geo-economic features confronting Zambia including being landlocked and dependent on importing all the feedstock.

It is therefore a matter of great concern that while global oil prices have hit rock bottom to nearly US$40.00 per barrel from a peak of around US$120.00 at the end of last year, sadly this decrease has not reflected at the pump price.  If anything prices have been creeping up steadily without reference to global parity.

In South Africa oil prices are directly linked to the global oil prices and as of now a liter is costing nearly R12, which is less than a dollar.

In Zambia our petrol is always above US$1.00 per litre.

There is need therefore to closely scrutinize the various components included in our petrol price considering that depreciation is not the only reason that will force the price up.

South Africa’s currency has depreciated to the extent of reaching the lowest rates of R14.40 to a dollar and yet the fuel has not breached the dollar.  In fact South Africa has a two tier pricing system for inland and coastal areas.  In both cases the price is below the dollar.

The justification for high fuel prices in Zambia must be a matter of serious study to save the country from excessive profits enjoyed by unscrupulous suppliers as was the case when we paid twice the price of crude oil to Trafigura.

This mistake should not be repeated.

Feedstock suppliers must be scrutinized very closely and the pricing equally watched for excesses that will impact negatively on the consumer.

Perhaps it is time that the Government considers opening the supply to oil marketing companies that should compete for a bulk supply system in which the Government does not have direct control.

The excise duty imposition intended to make importation of finished products expensive is obviously working against our interest as a nation because Government is forced to participate directly in oil importation.