By Brian Mulenga
The essential ingredient for making petrol is crude oil When the price of petrol was last adjusted it was $65 per barrel. Today it’s is $75 per barrel.
When the price was adjusted in 2019 the dollar was trading at K13 per dollar today it is at 16.5.
Let us do some simple arithmetic here
$65 multiplied by 13 = K 845
$75 multiplied by 16.5 = K 1237.50
So the price of the raw material of producing petrol in kwacha terms has gone up 46.45 per cent.
If I increase K17. 62 by 46.45 per cent I get K 25.89.
That is the real cost of a litre of fuel today. Just this simple Maths tells me that even now the only way the price of fuel has not reached K 25.89 is because we have removed VAT and excise duty.
Whatever way we want to do these things we simply don’t have the money to subsidize fuel by K8.27 per litre.
According to ERB we consume 1. 2 million litres of petrol per day. So K8.27 multiplied 1.2 million gives K9.924 million a day.
That is just petrol. We consume even more diesel. 2.5 Million litres per day. That too is subidised. Plus kerosene. Plus HFO. Plus LPG.
In short for us to maintain the same fuel price we need more than K30 million per day or $1.9 million dollars per day or $ 693.5 million per year.
K 25.89 per litre. Keep that figure. That is the real cost reflective price for a litre of petrol. The price of fuel was going to go up whether we like it or not.
Just the depreciation of the kwacha was going to ensure that. Not the IMF not PF not UPND just the cost in kwacha terms for producing a litre of petrol.
In Economics they say there is no free lunch. This is a clear example of this.