Fuel crisis fears stir action

President Peter Mutharika has ordered relevant government ministries, departments and agencies (MDAs) to strategise and develop an action plan to ensure security of fuel supply amid disruptions in the Middle East. Minister of Finance, Economic Affairs and Decentralisation Joseph Mwanamvekha confirmed in an interview on Monday evening that the President has tasked his ministry, that of Energy and Mining, National Oil Company of Malawi (Nocma), Malawi Energy Regulatory Authority (Mera), Office of the President and Cabinet and Reserve Bank of Malawi (RBM) to devise the plans. He said government wants to ensure that the country is not affected by the war in the Middle East, which has disrupted traffic flow around the Strait of Hormuz which handles around 25 percent of global crude oil trade.

Alternative pipelines from Saudi Arabia, the United Arab Emirates (UAE) and Iraq roughly handle 10 percent of global oil supply, but could still face disruption if shipments cannot pass through the strait. Mwanamvekha said it was premature to disclose progress on the measures being put in place to date. “But normally when the President has made a directive, it is a command and we have to make sure that we implement what our President has said,” he said.

International media outlets, including BBC and Al Jazeera reported that global oil prices reached $114 (about K199 614) per barrel yesterday from $70 (about K122 570) last week due to the joint US and Israel war on Iran. The increase marked the first time oil has risen above $100 (K175 100) per barrel since Russia’s February 2022 invasion of Ukraine, according to Aljazeera. Yesterday, The Guardian newspaper of the UK reported that Saudi Arabian State oil firm Aramco warned of an oil market ‘catastrophe’ unless the Strait of Hormuz reopens soon.

[paywall]

The world’s largest oil company described the crisis as by far the biggest the region has seen, but stated that it can reroute 70 percent of exports and tap crude held in storage. The rapid fuel price increases of as high as 50 percent—is driven by fears of supply disruptions as marine traffic through the Strait of Hormuz has almost ground to a halt amid the war. According to Al Jazeera, military attacks on vessels and interference with navigation equipment has forced most operators to anchor their ships at the waterway’s edge rather than risk crossing.

With Mera reintroducing the Automatic Pricing Mechanism, which entails that any changes of minus/plus five percent in the value of the kwacha exchange rate to the dollar and free on board prices of refined petroleum products on the international market trigger price reviews either upwards or downwards. During its last meeting in February, the Mera Energy Pricing Committee maintained the price of diesel at K4 695 per litre and that of petrol at K 4 945 per litre, but increased liquefied petroleum gas price from K3 740 to K4 475 per kilogramme.

[/paywall]