Staff Writer
The mines and energy ministry has resolved to keep fuel prices unchanged for the month of August at the back of rolling fuel hikes for the better part of 2022.
Local fuel prices are left unchanged for the month of August at N$22.28 for petrol and N$22.77 for diesel while the ministry has also decided to reinstate the fuel tax.
At the same time, the ministry has also left the levy reductions in place for the MVA levy, road user charge levy and NAMCOR levy until further notice.
In response to recent demands by local fuel retailers, the MME resolved to increase the dealer margin by 50 cents from N$1.13 per litre to N$1.63 per litre.
Simonis Storm said Year-To-Date, the MME has incurred a net under-recovery of N$5.76 on petrol and N$6.94 on diesel.
“This implies that if the National Energy Fund (NEF) did not subsidise under-recoveries during
2022, Namibia would currently have petrol and diesel prices of N$28.04 and N$29.71 respectively,” says Simonis Storm.
The ministry said since mid-June 2022, international crude oil prices have fallen by nearly 20% amid rising fears that the aggressive interest rate hikes implemented by many central banks, including the Federal Reserve, could lead to a recession in major developed economies.
“Despite that, tough issues related to the energy transition and geopolitical uncertainty will yet continue to linger over the oil market into the future. However, at the present time the oil prices are at least falling due to the need to address the high fears of a global economic recession.”
“The latest calculation by the ministry indicate that the average price for unleaded petrol 95 over the period of 01-22 July 2022 is at N$130.463 per barrel, compared to US$159.267, a huge decrease of about US$29 over the review period. Additionally, the average price for diesel 50ppm over the period of 01-22 July 2022 is at US$141.547 per barrel, compared to US$170.252 per barrel at the end of June 2022, another significant decrease of about US$29 per barrel over the review period,” said the ministry.
Simonis Storm says according to consensus forecasts on Bloomberg, brent crude is expected to average USD 100 per barrel in 3Q2022 and 95 in 4Q2022 compared to 112.60 in 2Q2022.
“The expected moderation in global oil prices is mainly driven by recessionary fears in advanced economies and it is likely that constrained international travel due to staff shortages at both airlines and airports (primarily in the US and Europe) also weighed on oil demand forecasts.”
“However, economic fundamentals in the oil market should keep global oil prices high as global inventories remain low according to the Energy Information Administration (EIA). The uncertainty around Russian supply of oil will spook markets and keep prices volatile, even though commodity traders still bypass sanctions to some extent,” says Simonis Storm.
The experts add that although recent price developments have kept global extraction and exploration companies profitable, net investment remains on a declining trend.
Both production in oil fields and the number of wells is decreasing globally, with rapid reserve depletion according to the IMF.
Simonis Storm observes that the drop in capital expenditure (CAPEX) and replacement of oil reserves has persisted since 2014.
“Hence, oil prices are likely to remain high in our view given the mismatch in demand and supply. OPEC and participating non-OPEC member states decided on 30 June 2022 to increase their daily production target by 648,000 barrels per day (bpd) during July 2022 and August 2022.”
“While still below the necessary levels to meet demand, this increase is higher than the adjustments of 400,000 and 432,000 bpd we saw in earlier months. The next meeting will be held on 3 August 2022, where it is expected for production targets to remain unchanged,” says the report.
