THE price of global crude oil has continued to fluctuate, signalling that Zambia should consider hedging against price shocks to cushion the impact on the economy.
Zanaco Bank head of research Patrick Chileshe said the current 60-day procurement cycle disadvantages the country in an event of a price reduction, hence the need to consider hedging through futures contracts, which are legal agreements to buy a particular commodity at a predetermined price at a specified time in the future.
Yesterday, the price of oil futures stood at US$60.47 per barrel, up 32 cents although this is a drop from the highs of US$87 recorded in October.
Zambia’s annual oil procurement bill stands at about US$1 billion and any increases in the commodity, which is the lifeblood of any economy, means that the country has to spend more.