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Temporary Levies Reduction Couldn’t Hold Fuel Hikes Longer

By: Nghiinomenwa Erastus and Justicia Shipena

Domestic fuel levies reduction couldn’t hold back international oil price volatility and global geopolitics as Tom Alweendo and team resolved to increase the cost of fuel shortly after last month’s reduction.

Come Wednesday (1 June), economic agents will pay an extra N$2.50 per litre of petrol and N$1.50 per litre of diesel, the mines and energy ministry announced on Monday.

The levies reduction on MVA, Namcor and RFA could not assimilate all the international oil volatility as the country experienced another huge under-recovery (price differences between the domestic pump and global prices).

For petroleum, the under-recovery is at N$2.80, while at N$1.56 per litre diesel as international oil prices keep soaring and supply constraints worsen for May 2022.

These under-recoveries will cost the National Energy Fund around N$179 million.

The mines and energy team, led by the deputy minister Kornelius Shilunga explained that they couldn’t shield the economic agents much from international oil price changes and exchange rate further this month.

“The under-recoveries are recorded despite the best efforts by the ministry last month that aims at assisting consumers by implementing a temporary reduction of levies imposed on the price of fuel,” said Shilunga.

However, the ministry admitted that the increase would have been high for economic agents if it were not for the current three-month temporary reduction.

On why the domestic cushioning moves are not 100 per cent (slowing down increases), the ministry explained Namibia is a price taker in the international oil market, and government has no influence on the international oil prices where importers are buying from.

“Therefore, it is important to understand that the government is only in direct control at the levels of the domestic levies, taxes, and margins regarding the price of fuel,” the ministry explained.

The country’s energy team added that they understand that the consumers are under financial pressure, however, the ministry has exhausted all its avenues to ensure the security of supply and avail some funds to cover price differences (under-recoveries).

Due to international oil prices pressure, the ministry was compelled to increase pump prices locally, and as of Wednesday, at Walvis Bay, petrol will cost N$20.40 per litre, and diesel will cost N$21,43 per litre.

Pump prices will be adjusted accordingly depending on your distance from the cost within the approved framework for the rest of the country.

Consumers and industries are also cautioned that prices are again expected to keep climbing as the European countries are repackaging another sanction which could involve total ban of Russian oil imports in the next six months.

Moreover, the rand weakness against the US$ and the eventual lifting of lockdown restrictions in China pose as threats to future fuel price hikes in Namibia.

Meanwhile, FirstRand Namibia Economist Ruusa Nandago says that it depends on when the ministry of mines and energy makes their fuel price decision; usually, they consider the global oil prices and exchange rate.

“At the moment, the global fuel remains relatively high; therefore, we expect the ministry of mines would have to increase fuel prices again this year.”

She added that Namibia expects fuel prices to be high.

“But we are not sure of the magnitude,’ said Nandago.

“The deficits are also funded by the customers when they buy fuel. Somehow I feel they also find a way to push the petrol price up,” a driver told The Villager.

He added that the increase is costly and suggested that the government subside will be the only way fuel consumers survive.

Another said the fuel increase is killing the consumers.

“They must have mercy on us because we can’t do business if we can’t fill up,” a taxi driver said.


Justicia Shipena

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