By: Nghiinomenwa Erastus
Across the Orange River, South African consumers are getting some relief early in the new year with fuel prices set to fall on today- with the retail price of petrol (93) getting a cut by 71 cents a litre, while 95 will decrease by 68c.
The wholesale price of diesel (0,05% Sulphur) will be lowered by 67.8c a litre and 0,005% by 69.8c in South Africa.
Back to Namibia, the ministry of mines and energy became an unlikely hero for many motorists and consumers after it announced that there will be no fuel price increase for the month of January 2022.
This comes after refined petrol and diesel prices in international markets declined to induce an over-recovery domestically- as Omicron variants dented economic activity globally, reducing demand for fuel.
The ministry announced the fuel prices in a statement released at the end of December 2021.
For January there will be no extra budgeting for fuel as the pump price for both diesel and petrol will stay the same at N$15,65 per litre and diesel price will remain N$15,58 per litre in Walvis Bay (port of entry) and will remain the same country wide
At the international level the refined petrol and diesel prices have reduced by US$7 in December 2021, from an average of US$91 in November 2021 to an average of US$84 in December 2021.
As a result, local prices were above international prices, an over-recovery of 21,079 cents per litre was recorded on petrol while 50ppm diesel recorded an over-recovery of 18,936 cents per litre.
“It is for that reason that the ministry has resolved to keep fuel pump prices for January 2022 unchanged,” the statement read.
The ministry did not however pass on the over-recovery experienced to the consumers in December 2021, but rather kept the pump prices unchanged.
“Moreover, the December 2021 fuel price adjustment has brought our local pump prices on par with the international oil prices, hence slight over-recoveries are recorded during the month of December 2021,” explained the ministry.
The ministry did not explain further why it did not reduce fuel prices despite it being cheaper at the international level, however, it highlighted that the country currency depreciated against which reduced the gain.
Simonis Storm’s analysis offered the explanation that the surplus gained by the over-recovery in December 2021 will be used to fund the National Energy Fund (NEF) (which in turn will be used to finance any future under-recoveries).
FUEL LEVY THE HERO IN THE ABSENCE OF OIL STORAGE
Local petrol prices would have increased from N$11,35 in January 2021 to N$20,08 by the end of December 2021, if it was not for the fuel levy through NEF that keeps partially funding fuel price differences (international minus domestic).
Namibia is a net importer of refined fuel (petrol and diesel) and by the end of 2021, petroleum imports accounted for 9,5% of total imports on average and totaled N$97,1 million in import purchases, Simonis Storm’s assessment shows.
At the same time, the government paid over N$264 million in fuel subsidy to cover the under-recovery for October and November 2021.
As fuel price volatility continued its untamed behavior for 2021, while the country’s second biggest investment (oil storage)- which was supposed to cushion the country from such volatility has gone into hiding despite it being completed and handed over
At the end of December 2021, the government and consumers, through the National Energy Fund (NEF) paid N$110 million for under recoveries recorded last month.
Over N$154 million was paid at the end of November 2021, for the October recovery.
Almost, if not all months last year, international fuel prices increased and the impact was either passed on to the consumers through pump prices or the motorists and government covered it through various levies.
According to Simonis Storm’s assessment, during 2021, the country incurred under-recoveries of N$8,73 per litre in total.
However, the National Energy Fund partially finances under-recoveries.
The NEF has financed about 51% of under-recoveries experienced in 2021, the rest was passed on to consumers.
Simonis Storm’s analysis explained that the NEF subsidy “is of great assistance in alleviating inflationary pressures faced by consumers”.
To put the price change in perspective, motorists and industries paid N$11,38 per litre for diesel at the start of this year and N$15,58 per litre by end of December 2021.
By the end of December 2021 to date, motorists with 59 litre tank (diesel) will have to fork out N$919,22 to fill their tank, compared to N$671,42 they used to pay in January 2021, Simonis Storm shows.
While those with 80 litre tanks will have to spend N$1 246,40 to fill up from December 2021 to date, increasing by N$336 from January expenditure.
The big machines, 89 litre tanks (diesel), have increased their filling up budget by N$ 373,8 from January 2021 to December 2021.
The true cost is however determined by how frequent motorists utilize their vehicles.