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Zambian OMCs Anticipate Reduction, But Experts Remain Skeptical

With experts casting doubt on hopes of a K5 decrease and the Oil Marketing Companies Association of Zambia (OMCAZ) predicting one, fuel prices in Zambia are set for a possible tug-of-war.

Dr. Kafula Mubanga, president of OMCAZ, thinks the recent strengthening of the Kwacha versus the US dollar is the key to reduced fuel prices. He contends that lower-priced crude oil imports denominated in dollars will result in a K5 decline at the pumps because of lower transportation expenses caused by the Tazama pipeline’s functioning. This hope is based on the idea that customers would pay less for goods and services.

Prof. Lubinda Haabazoka, a well-known economist, is skeptical of this predicted decline. In his view, a substantial price decrease cannot be affected by the Kwacha’s appreciation alone. He draws attention to the intricate relationships between government taxes, marketing margins, and oil prices globally, implying that they might have a greater beneficial impact than the Kwacha.

The Energy Regulation Board (ERB), which is in charge of fuel price modifications, uses a formula that considers several variables, including worldwide oil prices, local production costs, and marketing margins. While the Kwacha’s appreciation may be considered, the exact influence is unknown.

Zambian customers are stuck in the middle, waiting for relief at the pump but it is unclear when it will arrive. While the idea of a K5 drop is undeniably attractive, Dr. Haabazoka’s warning serves as a reminder that various causes influence gasoline costs, and the Kwacha’s appreciation may not be the silver bullet everyone desires.

Finally, the next fuel price review will reveal the solution to resolving this uncertainty. If a decrease occurs, it will be a great relief for Zambian consumers struggling with growing living costs. However, if prices remain constant, a better knowledge of the underlying elements will be required, perhaps leading to a more transparent pricing method that represents the genuine impact of exchange rate variations and other cost variables.

Days ahead will be critical as Zambians anxiously await a fuel price cut that will alleviate financial strain and stimulate the country’s economy. However, this experience highlights the necessity of a thorough, open, and data-driven strategy for fuel pricing in Zambia, guaranteeing equity for both customers and industry participants, regardless of the outcome.

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