Editor's Comment

No fuel reduction is too small

TWO days ago, the Energy Regulation Board (ERB) announced the reduction in pump prices of fuel by about seven percent.

The reduction was effected on Monday night.
The reduction is the second this year, the first being in January.
Following this price reduction, petrol, which was selling at K12.50 per litre, will now be fetching K11.67 representing a 6.64 percent drop, while the price of diesel has gone down from K10.72 to K9.87 per litre, translating into a 7.93 percent reduction.
The price of kerosene has dropped from K6.81 to K6.50 per litre while that of low sulphur gas has gone down from K13.01 to K12.16 per litre.
In announcing the reduction, ERB board chairperson Raymond Mpundu said the adjustment in pump prices of petroleum products has been necessitated by excess supply, high oil inventories and appreciation of the Kwacha.
Mr Mpundu said there has been a sustained appreciation of the Kwacha since the last adjustment of fuel prices in January this year.
The Kwacha has in the past few weeks appreciated to the K9 range against US$1, from a high of K14 per dollar in 2015.
In view of the fuel price reduction, we expect the players in the economy to pass on the costs or savings to the consumer.
When there is an upward adjustment pump prices, business houses take advantage of the situation to increase the prices of goods and services.
Since there is a decrease in fuel prices, the business community should likewise drop the prices of their goods.
Prices of petroleum have a direct impact on various sectors of the economy, ranging from manufactures and mines to traders and constructors.
Since fuel is the driver or key ingredient of economies, prices of almost commodities go up – vegetables, bread, beef, milk which are transported from the producer to the wholesaler or retailer.
In Zambia’s situation, the ERB has responded positively to the excess supply, high oil inventories and appreciation of the Kwacha.
There are some who argue that the reduction is insignificant. To the contrary, it is. This particularly so for those in sectors whose operations depend significantly on the use of fuel.
For instance, bus operators who use hundreds if not thousands of litres of diesel or petrol every day, will make a significant saving – a saving that should benefit not only them, but the commuters too.
Similarly, we expect manufacturers to respond in the same manner by cushioning their consumers.
People who are building expect transport hire charges to come down as a result of the reduction in fuel prices.
Their response by reducing prices of goods and services will have a spiral effect as there will be more money in the economy.
The reduction of fuel prices should culminate into consumers having more money in their pockets.
And when the consumer makes some significant savings, there will be disposable income which will be invested in other ventures.
Business houses should not be stingy by holding out prices of commodities.
Consumers expect a win-win situation for the benefit of all.

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