Thu, 10 Aug 2017 13:29:31 +0000
By Sandra Machima
ZAMBIANS must take note of Government’s continued efforts of passing the benefits of falling oil prices to consumers through fuel pump price reductions, Energy Forum Zambia chair person Johnstone Chikwanda has said.
Mr Chikwanda also advised the government to take advantage of low oil prices to fund critical projects and invest on behalf of the public instead of reducing pump prices all the time.
He said the government should pursue other means of passing on the benefits of falling oil prices to the public other than through pump price reductions alone especially if the reductions were marginal.
“For instance, the latest fuel price reduction announced by the Energy Regulation Board (ERB) will save the industry an average of $10 million per month.
By the next price revision in 60 days’ time, the industry will have been saved at least $20 million, and instead of passing this benefit to the public by reducing the fuel price, Government can introduce a temporal “oil exploration and special projects fund” which can get populated by these savings to finance construction of more fuel reserve tanks which are inadequate,” he said.
Mr Chikwanda noted that the government had managed to put the energy sector on the correct path, saying if it could adopt some of these global practices, they would achieve a lot in the next five years.
He said that should the Kwacha remain strong which was a likely scenario with oil prices remaining low going into 2018, Government could easily raise over $100 million to support oil exploration countrywide and support construction of strategic fuel storage facilities.
“The fund can finance construction of more fuel reserve tanks which are inadequate.
“We need more fuel storage tanks as a matter of urgency especially with government disengagement from fuel procurement, and therefore the “oil exploration and special projects fund” can assist to accelerate oil and gas exploration activities in Zambia so that potential oil fields are brought to an attractive stage for the investor community by government,” he said.
He noted that several countries have an oil exploration fund inserted in the fuel price structure including an accident fund.
“The fund can also use these funds to hedge against potential fuel price increase for a minimum of a year and ensure there is no price escalation for at least a year, and the best time to utilize fund mobilisation from the fuel price structure is when global prices are low.
When the prices become high, you cannot insert much in the fuel price structure.”
Mr Chikwanda said while the price reduction of fuel was welcome, it was vital to save the industry some $10 million per month, adding that now with the 6.5 percent average reduction, it was unclear if service and commodity providers would reduce various prices by a similar margin.
