In Mozambique, a wind of change is blowing over the oil sector. Following Decree 89/2019, companies are now allowed to adjust fuel prices monthly. The change is communicated to licensed distributors on the third Thursday of each month, introducing a new paradigm in the fuel market.
The decision seems to have come in response to the notorious debt owed to the oil companies, which amounts to 400 million dollars and has created an atmosphere of tension between the parties involved. Companies in the sector welcome the new policy, regarding it as a light at the end of the tunnel for the sustainability of their operations, after a long period of selling fuel below cost.
Moisés Paulino, National Director of Hydrocarbons and Fuels, stated that the measure now allows prices to be aligned with the international market. In other words, if prices rise internationally, the same will happen in Mozambican territory, and vice versa. However, he stressed that the magnitude of the change may not be proportional.
With the implementation of this measure, the oil companies see an opportunity for recovery after a period of 18 months, during which some companies went bankrupt and others operate with limited resources. This decision, according to the sector, brings fairness to the fuel market and represents recognition of the Government's insufficient funds to settle its debts to the oil companies.
According to article 75 of the Decree, price adjustment is mandatory when the Base Cost varies by more than three per cent or when there is a change in the amount of the applicable taxes. The regulator ARENE and the Council of Ministers have defined roles in price changes. Each adjustment must be published in the country's main newspapers and on the regulator's official website.
The measure is seen as a breath of fresh air for the oil companies. The change is now expected to have a significant impact on the sustainability of the oil companies and, consequently, on the Mozambican economy, given the crucial importance of the fuel sector to it.
