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High Oil Prices and Possible Solutions for Zambia

High Oil Prices and Possible Solutions for Zambia. A Presentation at the Economics Association of Zambia meeting 30 Sept 2008 Lusaka, Zambia by Raphael Salasini Email: rsalasin@coppernet.zm. Outline. World Oil Production World Oil Prices Definition of “Low Oil Prices”

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High Oil Prices and Possible Solutions for Zambia

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  1. High Oil Prices and Possible Solutions for Zambia A Presentation at the Economics Association of Zambia meeting 30 Sept 2008 Lusaka, Zambia by Raphael Salasini Email: rsalasin@coppernet.zm

  2. Outline • World Oil Production • World Oil Prices • Definition of “Low Oil Prices” • The Petroleum Supply Chain in Zambia • Petroleum Price Structure • Options to Reduce Prices

  3. Actual Projection 1 World Oil Production

  4. Prices Production Have we reached the “Peak Oil”? 2 World Oil Prices

  5. 3 Definition of Low Petroleum Prices • Reduction in cost of petroleum products is characterized by: • Supply:Steady, reliable and adequate supply • Prices: Competitive, stable and fair prices

  6. 4 The Petroleum Supply Chain Tazama tank farm at Dar Feed stock cargo ship at Dar GRZ Finished products from region Tazama pipeline 1700km Indeni refinery Fuel terminal at Ndola Filling station Train Road

  7. Petroleum Consumption by SectorSource:ERB

  8. 5Petroleum Price Structure REGIONAL COMPARISON • Comparison of Diesel Prices in Southern Africa – Sept 2007

  9. 6 Options to Reduce Prices • Any measures to significantly reduce prices must address: • Government Taxes, Duties, & Levies • Basic Cost

  10. 6.1 Govt Taxes, Duties & Levies • Taxes on petroleum products are very important and contribute significantly to Govt revenue • Reduction in taxes must therefore be a strategic policy decision: “Direct immediate tax revenue” VERSUS “Indirect future tax revenue”

  11. Current Government taxes and duties i) Crude Oil Import Duty 5% (of Ndola landed cost) ii) Excise duty (of whole sale price to OMCs) Petrol 36% Diesel 7% Kerosene 0% iii) VAT 16%(applied on final price) Iv) Other: ERB, SRF

  12. Recent Reductions on Excise Duty on Petroleum Products

  13. 6.2 Petroleum Basic Cost • What can increase “Basic Cost”? • Inefficient procurement • Expensive financing • Poor feedstock cargo formulation • Inadequate national demand forecasting and strategic planning • Lack of adequate national strategic reserves • Inefficient feedstock processing

  14. 7 Question • Q: Who is responsible for planning and coordination of operations of the Zambian electricity network? A: Zesco Ltd • Q: Who is responsible for planning and coordination of operations of the Zambian petroleum supply chain?

  15. Thank You

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