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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
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
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
2 world oil prices
Prices

Production

Have we reached the “Peak Oil”?

2 World Oil Prices
3 definition of low petroleum prices
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
4 the petroleum supply chain
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

5 petroleum price s tructure
5Petroleum Price Structure

REGIONAL COMPARISON

  • Comparison of Diesel Prices in Southern Africa – Sept 2007
6 options to reduce prices
6 Options to Reduce Prices
  • Any measures to significantly reduce prices must address:
    • Government Taxes, Duties, & Levies
    • Basic Cost
6 1 govt taxes duties levies
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”

current government taxes and duties
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

6 2 petroleum basic cost
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
7 question
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?