By BUUMBA CHIMBULU
THE expected a drop in global oil prices, coupled with the expected steady performance of the Kwacha, should result in even further price reductions for fuel at the next review, says First National Bank (FNB) Zambia.
The Energy Regulation Board adjusted the fuel prices downwards by K3.56/litre for petrol and K3.14/litre for diesel at the July price review, the lowest prices seen on the market since April 2022.
Additionally, FNB Zambia assumes that the impact of transportation or crude differentiation would not be significant enough to have a meaningful effect on prices.
FNB Zambia therefore assumes that the market was driven by fundamental factors; consequently, the market adjusted to changes in supply and demand as opposed to speculation.
This is contained in the FNB Zambia Agribusiness Monthly Report for July/August 2022.
“We can analyse the potential price direction soon, which should be the next three months, based on certain factors.
“Some oil sales, particularly within countries that have secured long-term supply contracts, have already been anticipated in advance, which means that after the release of the strategic petroleum reserves, there is no elasticity in the crude supply market,” the bank stated.
Meanwhile, the bank said the increase in fertiliser prices was of particular concern given that Zambia had been largely insulated from the international food price increase due to stocks of maize and other key crops from the previous farming season which referenced cheaper fertiliser prices.
Fertiliser prices have, on the international market increased by 74 percent.
FNB Zambia observed that upside pressures remain high as energy prices and fertiliser prices remain elevated relative to last year.
“As the country goes into a new farming season for summer crops such as maize, the expectation is for domestic food prices to tick up off the back of the increased fertiliser prices,” the bank stated.