By: Justicia Shipena
Economists say that the fuel pump decrease will relieve local motorists and fuel consumers, and could signal a fuel decrease towards the end of the year.
On Monday, the mines and energy ministry on Monday announced that consumers would not have to fork in extra cents for petrol; however price for diesel remains unchanged.
In a press statement, the ministry said petrol prices would decrease by 100 cents per litre as of 05 October 2022.
The new fuel prices in Walvis Bay now become N$ 20.08 per litre for petrol and will remain N$ 22.12 per litre for diesel, and fuel prices across the country will also be adjusted accordingly.
Speaking to The Villager on Monday, Simonis Storm Securities economist Theo Klein said global oil prices in US dollars declined significantly, trending below 90 dollars per barrel, whereas the rand is trending at a much weaker level than the US dollar.
“However, if you look at the rand oil price that has been declining steadily over the last couple of weeks, we see that rand’s weakness is overshadowed by a decline in global oil prices in US dollar terms,” said Klein.
Hence he said it is possible that Namibia can see a local fuel price cut towards the end of the year, which will provide relief to consumers in the country.
Economic analyst Klaus Schade said that month to month, international prices drop by about 10 per cent during September compared to August.
“So that is a very positive development for motorists in Namibia. On the other hand, the US dollar is getting stronger and stronger, not just against the Namibia dollar but almost all the currencies globally. The Namibian dollar depreciation was about 5 per cent between August and September,” he said.
Schade added that this could signal that there is room for a downward adjustment or reduction in fuel prices; however, he thinks the international oil prices are still very volatile.
FirstRand Namibia Economist Ruusa Nandago agreed with these sentiments, stating that the country still needs to manage finances carefully.
“Because oil prices are volatile, they could increase and decrease anytime. We need to be cautious with our spending,” she said.
She also argued that the lowering of the fuel prices was not necessarily because of Namibia’s dollar pike to the South African Rand but rather the movement in international prices.
She said the Brent crude oil price moved lower at about 86 dollars per barrel.
“That is an influential factor in determining the local file price. It has to do with how international oil prices are moving,” she said.
Nandago said the exchange rate has also weakened, and because Namibia imports oil globally, the exchange rate does play a role.
Nandago added that fuel prices are still elevated, but it will be some relief to motorists if Namibia continues to observe a decline in the fuel price.
“I think it will bring some relief if fuel prices are lower, but I think fuel prices are much higher than they were at the beginning of the year. If we see fuel decline is also good for businesses because that means they don’t have to raise their prices as much for their final goods or not seeing high prices in food prices or similar activities,” she explained.
She concluded that the oil price decline is a welcome relief and will take some pressure off consumers; however, Nandago said
In a media release, Andreas Simon mines and energy ministry spokesperson said the current prices signify the lowest level since January 2022 amid rising fears that a looming economic downturn will hurt global demand in energy markets.
“The price of US benchmark West Texas Intermediate is now trading at about $79 per barrel, reaching its lowest point since January 2022 amid mounting recession fears,” he said.
Meanwhile, Simon stated that the international benchmark Brent crude price is trading at about U$87 per barrel.
He added that oil prices may still rebound since global supply could be further limited in the long-term as sanctions on Russian energy tighten amid the ongoing conflict in Eastern Europe.
“The latest calculations by the ministry indicate that the average price for Unleaded Petrol 95 over the period of 01-23 September 2022 is at USD98.794 per barrel (compared to USD1 10.334 per barrel at the end of August 2022), a huge decrease of about USD12 over the review period.”
He said the average price for diesel 50ppm throughout September 2022 is USD133.675 per barrel compared to USD136.360 per barrel at the end of August 2022.
“A much lower decrease of about USD3 per barrel over the review period. Furthermore, the exchange rate figures for September 2022 indicate that the NAD has depreciated against the USD at N$17.4573 per USD,” he said.
Furthermore, Simon said the currency depreciation has a negative effect on the import parity price calculations and the local pump prices of fuel.
In addition, he said the ministry recorded a combination of a high over-recovery on petrol and a low under-recovery on diesel.
“An over-recovery of 234 cents per litre on petrol and an under-recovery of about 33 cents per litre on diesel,” said Simon.
The mines and energy ministry has also resolved to reinstate the road user charges and the MVA levy back to their original levels.
Meanwhile, the National Petroleum Corporation of Namibia (Namcor) levy will remain at its current level until further notice.
Last month, the ministry also decided to lower Namibia’s fuel prices.
The price of petrol decreased by N$1.20 per litre, while diesel will go down by 65 cents.
At that time, the mines and energy minister Tom Alweendo said the ministry would continue with the extension of the temporary reduction of the road user charges and the Motor Vehicle Accident Fund and the National Petroleum Corporation levies.
In the same month, the ministry also resolved to increase the industry margin for fuel wholesalers by 20 cents per litre on all effective products.
The fuel prices for September stood at N$ 21.08 per litre for petrol and 22.12 Namibia dollars per litre for diesel.
justicia@thevillager.com.na
