The new prices are:
Unleaded Petrol 95: P15.47 per litre (down 32 thebe from previous zonal averages)
Diesel 50ppm: P16.28 per litre (minimal change)
Illuminating Paraffin: P13.11 per litre (minimal change)
This shift aims to balance equity, supply reliability, and administrative simplicity, while acknowledging varying demand-supply dynamics for different fuels.
Pros and Cons of Unitary Pricing vs. Zonal Pricing
The table below compares the two systems based on economic principles, official BERA statements, and observed impacts from the transition. Zonal pricing reflected local costs but created disparities; unitary pricing prioritizes uniformity but may introduce cross-subsidies.
Aspect | Pros of Unitary Pricing (vs. Zonal) | Cons of Unitary Pricing (vs. Zonal) |
|---|---|---|
Consumer Equity | Promotes national equality by eliminating regional price disparities; rural/remote consumers benefit from lower prices (e.g., petrol down 32 thebe everywhere, reducing burden in high-cost zones). | Urban consumers may face slight effective increases if the uniform price exceeds previous low urban rates, potentially seen as unfair cross-subsidization from city to rural areas. |
Supply Reliability | Addresses oil companies' concerns over inadequate zonal differentials for transport costs to remote areas, encouraging better nationwide distribution and reducing supply shortages in rural zones. | Risks under-recovery of actual transport costs in remote areas without additional subsidies, potentially discouraging long-term investments in rural infrastructure. |
Administrative Simplicity | Easier to implement and monitor with one national price per product; reduces complexity in regulation and reduces opportunities for arbitrage (e.g., cross-zone fuel buying). | Less granular cost reflection could complicate future adjustments if regional cost variations (e.g., due to fuel type dynamics) grow, requiring compensatory mechanisms like the National Petroleum Fund. |
Economic Efficiency | Overall price stability and slight reductions (e.g., for petrol) can boost consumer spending and economic activity; simplifies market signals for importers. | May distort efficient resource allocation by not pricing in local costs, potentially leading to overconsumption in low-cost urban areas or under-supply in high-cost rural ones. |
Market Competition | Levels the playing field for retailers nationwide, potentially fostering competition without zone-specific pricing battles. | Could reduce incentives for efficiency in transport/logistics, as uniform pricing masks cost variations that zonal systems highlight. |
Key Insights
Short-Term Benefits: The immediate price drop for petrol provides relief amid global oil volatility, benefiting most consumers equally.
Long-Term Considerations: While equity improves, ongoing monitoring will be crucial to cover any residual transport shortfalls and prevent supply disruptions. As the change is recent, further data on rural supply improvements or urban backlash may emerge.
This aligns with broader energy policy goals in Botswana, such as enhancing access and stability in a landlocked nation reliant on imports.
LECHA Energy will continue to monitor the effects of this new pricing structure and update you.