Economist Warns of Steep Fuel Price Hike Due to Supply Chain Disruptions

Economist Munyumba Mutwale has sounded the alarm on a significant surge in petrol and diesel prices in Zambia, with an increase of 15.1 percent since April 2023. This represents the most substantial adjustment since April 2022 and has been attributed to a combination of factors, primarily disruptions in the oil import supply chain.

In an interview, Mr. Mutwale shed light on the supply chain factor’s role in driving up the cost of petroleum products, revealing that the cost of processing and transporting finished petroleum goods into Zambia has played a pivotal role in the soaring prices. According to Mr. Mutwale, these costs have surged by a staggering 48 percent for petrol and 65 percent for diesel.

One of the leading contributors to the price hike is the increase in global crude oil prices, notably the rise in the Brent crude price to $90, a level not seen in ten months. This surge has been primarily driven by Russia and Saudi Arabia’s decision to extend oil supply cuts beyond expectations, resulting in a 1.5 million barrel deficit in the global market.

Mr. Mutwale cautioned that if Zambia does not witness improvements in the foreign exchange rate or interventions in the fuel supply chain, this upward trend in petrol prices could persist. He noted that the outlook for fuel pump prices remains uncertain but is likely to remain elevated in the near future, given the continued influence of these factors.

However, amid this uncertainty, Mr. Mutwale suggested that Oil Marketing Company (OMC) stocks could become more favorable on the stock market. Investors may find OMC stocks appealing as they potentially stand to benefit from the current fuel price dynamics.

As Zambians grapple with the consequences of these steep fuel price hikes, the government and relevant stakeholders may need to explore measures to stabilize the situation and mitigate the impact on consumers and businesses alike. The nation will be closely watching for any developments in the coming months as it navigates these challenging economic conditions.

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