Global oil price crash: Will not lower fuel prices in Mozambique

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Global oil price crash: Will not lower fuel prices in Mozambique

2:06 CAT | 15 Apr 2020

Photo: Magazine CRV

Since the middle of March, the price of a barrel of oil has dropped by more than 60 percent, due to the war between two of the main world producers. But the price of gasoline and diesel has remained unchanged in Mozambique since August 2019. “Not all short-term changes (in the price of a barrel of Brent) are captured,” explains Economy and Finance Minister Adriano Maleiane.

Just as Covid-19 became a global pandemic, Russia and Saudi Arabia, two major oil producers, entered a price war that culminated in successive drops in Brent prices from the around US$60.00 per barrel which obtained throughout the second half of 2019. In early April, the price had fallen to US$24, one of the biggest declines since 1991, during the Gulf War.

In Mozambique, prices are supposedly readjusted every month, taking into account the price of a barrel in international markets and the metical – US dollar exchange rate. But prices have remained unchanged since August. In cities with direct access to the sea, one litre of gasoline costs 66.49 meticais, diesel 63.51 meticais, lighting oil 48.44 meticais, cooking gas 63.26 meticais and compressed natural gas for vehicles 30.35 meticais.

Last Friday (April 10) the Minister of Economy and Finance was asked by MDM deputy Fernando Bismarque, whether or not, with the drop in prices of Brent crude, the cost of fuel would go down for Mozambicans.

“The price of fuel will help a lot but, as always when the price goes down, we have problems with the exchange rate, which creates some disturbance,” Adriano Maleiane started by arguing.

In a hearing before the Parliament’s Plan and Budget Commission, the head of Economy and Finance recalled that “when the State Budget was prepared, the exchange rate was at 62 (meticais per US dollar). Now it is 67. This difference – 5 meticais – times the hectolitres imported, is where the impact can overcome the low price effect (of Brent crude)”.

“We buy on a fixed-term contract, so not all short-term changes (in the price of a barrel of Brent) are captured. For example, what we are now consuming was purchased two months ago, so I cannot state, just by looking at these two variables, that it will go down,” Minister Maleiane concluded.

By Adérito Caldeira

Source: A Verdade