Expert cautions against complacency as fuel prices drop
A local economist has warned consumers against being wholly satisfied with the latest drop in fuel prices and rather urged producers and policymakers to seriously consider adopting electric vehicles to avoid future shocks.
The mines ministry announced last week a fuel decrease of N$1 per litre for petrol and N$0.40 per litre for diesel throughout the country with effect from the 5th of December 2018.
Pump prices have decreased for the first time since September 2017 for petrol and since July 2017 for diesel.
Petrol prices remain, however, 11.2% higher than at the beginning of 2018 and diesel prices 20.2% higher.
Economist Klaus Schade has advised that migrating to electric cars will not only reduce Namibia’s dependency on oil imports but support the Growth at Home Strategy by harnessing natural resources such as solar, wind, biomass, and wave power to generate electricity.
Said he, “Policymakers need to take the initiative to design a joint strategy to promote the use (and production) of electrical vehicles not only in Namibia but in the southern African region.”
“Namibia and the southern African region at large are rich in lithium and cobalt, the main inputs into the production of lithium-ion batteries that power electric vehicles. Instead of exporting the minerals as raw materials, policymakers need to design a strategy to add value to the minerals and produce the batteries in the region.”
However, in the interim, Schade reasons that the decrease in fuel prices brings much-needed relief to Namibian producers and consumers that have to cope with a slow economic recovery and increasing inflation.
He said it will ease the burden on the consumer during the upcoming festive and holiday season.
“The drop in fuel prices is more generous than the previous under-recoveries would have suggested,” he said.
For Schade, the current drop in oil prices highlights once more the volatility in the global oil market that is influenced not only by the performance of the global economy but also by geopolitical factors such as the tensions in the middle east.
He said the current declining oil prices are mainly caused by a global slowdown of the economy due to continuing uncertainties surrounding the global trade system, which is not good news for Namibia.
“Slower global economic growth results in lower demand for basic commodities and hence lower prices, which hits commodity exporters such as Namibia.
Furthermore, lower oil prices will slow down the recovery of the Angolan economy and subsequently the Angolan demand for Namibian goods and services,” said the expert.