The Real Reasons for Fuel Price Reduction and marginal appreciation of the local currency – debunking the rhetoric
By Kennedy K. Mambwe(KBN TV)
Recently there has been a lot of speculation as to what has triggered the marginal appreciation of the local currency and a slight reduction in fuel prices. Some have attributed the slight downward fuel adjustment to the Tazama pipeline open access regime while others have linked the marginal Kwacha gain to increased copper production.
On face value, both arguments sound intelligent, but when you probe further, you will realise that none of the above reasons could pass a credibility test. As a matter of fact, the marginal reduction in fuel prices has nothing to do with the open access, but the fast-changing dynamics in the global trade order where the dollar has weakened and crude prices have significantly dropped.
Whilst it is true that the open access of Tazama pipeline may have reduced transportation cost of diesel to some extent, the key variables in determining petroleum products pricing is the exchange rate and the international crude prices.
Quick desk research will show you that as at February, 2025, Brent crude oil was fetching $83 per barrel compared to $65.62 per barrel as at 12th May, 2025, giving a major saving of $18 per barrel.
Now, $18 savings per barrel seems insignificant until you realise that Zambia’s monthly average demand for crude petroleum products is 30 million liters.
Simple arithmetic of multiplying $18 by 30 million liters gives us a staggering $540million in monthly savings. I have used $18 saving as a proxy for finished products to arrive at the $540m which is a reasonable approximation.
With that reduction in Brent crude oil prices on the international market, it would be insane for any authority anywhere in the world not to reduce the pump price for the benefit of end users. This is pretty much what has triggered the reduction in Zambia’s pump price of petroleum products, it’s nothing to do with the Tazama pipeline open access.
Having established the facts above, it follows therefore that the Kwacha is bound to make some marginal bullish gains against major convertible currencies for the following reasons:
1. There is an instant $540million reduction in demand of the dollar on the forex market
2. The global Trump effect that has weakened the performance of the dollar on the international market, leading to appreciation of the local currency as a reverse effect
3. Bank of Zambia forex support on the market – BOZ intervention in the market could lead to the appreciation of the Kwacha
4. Cooling off period for the agriculture inputs importation – as long as we are not importing agriculture inputs like now which is off peak, there is less demand for the dollar
5. Higher exchange rates – the higher the exchange rate, the fewer the participants on the forex market. Higher exchange rate inhibits SMEs and individual traders from importing as they cannot afford and consequently reduces dollar demand from this sector
6. There is a rumoured 20 percent increase in the copper production. I call it rumoured because we haven’t been given absolute numbers. The question we should be asking on this point is, if it’s the increase in copper production, has it led to the increase in our export volumes and can we sustain those export volumes to give stability to the local currency? If the answer is no, then the celebrated marginal gains won’t be sustainable in the long run.
Wonderful analysis clear and straightforward easy to be followed by anybody.
Really? What is there to analyse? Enjoy the drop and stop stressing us out with stuff we are not interested in.
So then it makes sense to conclude that what determines pricing of fuel & the performance of the exchange rate depends on external factors!
So when fuel increases its external factors at play causing it.
When the dollar, which pretty much affects trade internationally, skyrockets it affects local economic activities.
What do we want as Zambians: a strong Kwacha or a tissue Kwacha?For me I don’t give a damn to whatever factors cause the Kwacha to strengthen as long as it is strong. Anyone, even me, can make my own economic analysis, based on my own flawed lens of how I see things!
One of the primary motivations for the Tazama pipeline open access was to take middlemen out of the equation. And by thus doing deliver fuel at a cost that does not include a middleman’s profit margin.
Has this simple but clearly relevant factor been included in the computation? Or are we just so malicious we do not want to acknowledge positive policies advanced by UPND?
And let us not forget that it is a UPND policy currently in use that requires monthly review and adjustment of fuel prices to allow global and international fluctuations of oil prices to reflect on our local prices. Previously this was not the case and middlemen and filling stations were busy making millions using outdated prices when in fact global prices had dropped.
This is why Zambia can not progress rapidly. No gratitude for positive developments, just busy looking for explanations that leave the architects of the policy out of the narrative. We demonise the good policies crafted by our local leadership. And applaud outdated mechanisms that favour middlemen and foreigners. Very unfortunate.
The calculations used by KBN TV are wrong in that they are assuming that 1 liter is equivalent to 1 barrel when Infact not. A barrel is approximately 159 litres making the savings far much less than the 540 million dollars calculated.
KBN will never anything about this government so they will fish any reason to explain the good it does. If the case was opposite they would have written how the government has failed, that how KBN editorials are.
Yes,Kennedy Mambwe was denied an opportunity to represent us in a foreign country.They chose Panji Kaunda,instead
When the government attributed the depreciation of kwacha and high prices of fuel to global trade effects, everyone said no they have just failed and today we have a marginal appreciation of kwacha and fuel price reduction,so you have another strength to come start misleading us.all you think is that we are fools.Now that we still believe in your earlier guidance that the global market has nothing to do with the fuel prices and our kwacha,so shall it stand.
When the government attributed the depreciation of kwacha and high prices of fuel to global trade effects, everyone said no they have just failed and today we have a marginal appreciation of kwacha and fuel price reduction,so you have another strength to come start misleading us.all you think is that we are fools.Now that we still believe in your earlier guidance that the global market has nothing to do with the fuel prices and our kwacha,so shall it stand.thank you.
Imagine that. If it is negative the government is responsible for it but if it is positive, the government is not responsible for it. What kind of people are these?
So this implies that we have people who are hornet at lest. VIVA Governmental!
Crude oil is coming down so nearly all countries have reduced fuel prices not only zambia. Trump’s tariffs have put pressure on the dollar which has significantly weakened leading to all other world currencies gaining on the dollar not only the zambian kwacha.