MUSOKOTWANE EXPLAINS FUEL PRICE ADJUSTMENT
…says conversion of TAZAMA pipeline will cushion cost of fuel but will not automatically result in a reduction in the pump price
MINISTER of Finance and National Planning, Situmbeko Musokotwane says the conversion of the Tazama pipeline from a conduit that conveys crude feedstock to one that transports refined diesel will cushion the cost of fuel but will not automatically result in a reduction in the pump price.
Dr Musokotwane told Parliament that the fuel pump price was determined by a combination of factors such as the oil prices on the international market, transportation costs from the Port of Dar-es-Salaam in Tanzania to the Ndola Fuel Terminal (NFT) and the exchange rate.
“The cost of fuel in the country is driven by a number of things. Firstly, the price at which you buy it from the source in dollars, if the price in dollars goes up, you should expect prices also to be pushed up, if the price goes down, the opposite will happen.
“Secondly, the cost of transporting that fuel from Dar-esSalaam to Ndola, on this one, the cost of transportation as I just explained, that will tend to push the prices down indeed. The third major factor is the exchange rate, when the exchange rate becomes strong, the price of fuel goes down when the Kwacha becomes weak, the cost of fuel will tend to be pushed upwards,” Dr Musokotwane said.
He explained that the increase in the fuel pump price would have been much higher if government did not convert the Tazama pipeline to transport refined diesel.
Dr Musokotwane said the price of fuel would be cushioned by low transportation costs arising from the conversion of the pipeline despite the high exchange rate and international oil prices.
Meanwhile, Dr Musokotwane says the money that Government will save on fuel transportation costs after the conversion of the pipeline will be much more than the toll fees collected from tanker drivers.
Dr Musokotwane said a Cost Benefit Analysis (CBA) that Government undertook found that transporting fuel from Dar-es-Salaam to Ndola through the pipeline was far much cheaper that using fuel tanker trucks.
The Minister was responding to a question by Lundazi MP Brenda Nyirenda (PF) who asked whether Government had done a CBA to determine whether the transportation of fuel through the pipeline would be beneficial for Zambians compared to the revenue collection from fuel tanker drivers in toll fees.