The Energy Regulation Board (ERB) has noted with concern recent reports in some sections of the media indicating that Zambia has the highest petroleum prices compared to other countries in the region. We wish to put it on record that Zambia’s petroleum prices are competitively lower and are set in a manner that ensures cost reflectivity.
The determination of the price of petroleum products in the market is based on Energy Regulation (Petroleum Price Setting) Regulations that were promulgated in December 2024. To calculate the wholesale and retail prices of petroleum products (petrol, diesel, kerosene and jet A-1), the ERB uses the Import Parity Pricing model (IPP). The first or top cost line in the pricing model is the cost of product or Platts Arab Gulf price. Other costs incurred by importers are then added to the Platts price before arriving at the wholesale and retail prices. The aim is to ensure that the recommended prices recover all prudently incurred costs in the supply chain and that the final consumer pays a fair price.
Under the current petroleum regulations, Zambia does not subsidize the price of petroleum products. Further, all petroleum products are imported into the country as Zambia does not produce its own oil. The product is bought off the international market and is priced in US dollars. This requires that the performance of two key economic fundamentals is considered in determining the local price to ensure fairness to both the Oil Marketing Companies and the consumers of petroleum products. The two key fundamentals are:
- The international price of petroleum products – which Zambia has no control over; and
- The exchange rate determined by the performance of the Zambian Kwacha against the United States Dollar.
The impact of international oil prices on national petroleum prices is not limited to Zambia but can be compared to other countries in Africa. It should be observed that some countries have seaports, subsidies, different taxation regimes and economic environments.
Given that background, we wish to note that the Zambia’s prices of petroleum products are competitive in relation to other prices in sub-region and particularly the Eastern and Southern African region. Of eight (08) countries compared last month in the sub-region including Kenya, Zambia has the third lowest price in petrol after Botswana and Tanzania. For diesel, Zambia has the fourth lowest prices after Botswana, Tanzania and South Africa.
It should further be noted that all countries that have lower fuel prices compared to Zambia except Botswana, have seaports which Zambia does not have. In our IPP Model of determining petroleum prices, the cost of sea charges, form part of the final pump price.
The ERB wishes to reaffirm its continued commitment to setting energy prices that are fair to consumers while ensuring that players on the market earn a reasonable return on their investments.
Namukolo Kasumpa (Mrs.)
Manager – Public Relations
ENERGY REGULATION BOARD