By: Nghiinomenwa Erastus
There hasn’t been a more-than-a-dollar fuel price increase for the past three years; however, that would change as come 2 March, petrol and diesel will go up by N$1,20 and N$1,30, respectively.
The executive director in the ministry of Mines and Energy, Simeon Negumbo, delivered the announcement yesterday in the capital.
Negumbo urged people to tighten up as more fuel increases are expected since the government cannot do anything to alleviate the burden.
Average crude prices for both petrol and diesel jumped from US$96,8 to US$107,8 per barrel from US$97,9 to US$108,4 per barrel, respectively.
The jump has forced the ministry to implement the biggest price increase documented so far.
Negumbo said that their fuel hike, as determined by international crude price movement, is caused by the mismatch between the global oil supply and demand- there is more demand for oil products than the market can supply.
The OPEC countries had cut their supply drastically and are now reluctant to increase supply. Secondly, the geopolitical tension in the oil-producing regions has made matters worse for net importers like Namibia.
As a result, huge under-recoveries were recorded during the trading cycle under review for petrol, which was 140 cents per litre higher in the international market than the domestic pump price.
While for diesel, the price difference is at 160 cents per litre- making the country’s five importers record losses on their investment.
Consequently, forcing the mines ministry to jerk up the pump price for March to equalise international and domestic prices.
The fuel consumers have saved up to N$143 million through the energy fund to cover the under-recovery for February.
However, the savings were insufficient to prevent the massive increase planned for tomorrow.
It, therefore, means that the new fuel pump prices in Walvis Bay will become: N$17,15 per litre for Unleaded Petrol; and N$17,28 per litre for diesel 50ppm.
MME SYMPATHISE WITH YOU, BUT…
According to the executive director, the ministry understands and acknowledges the difficulties brought about by these adjustments.
“However, it is important to emphasise that those factors contributing to the sharp and continual increases in fuel prices are beyond the ministry’s control,” he said.
Negumbo further added that it is important to note that since the market remains highly volatile, the country might continue to experience further fuel price increments during the coming months.
Asked what plans the country or the ministry has to cushion the economy from the volatility, he said the ministry would continue to monitor the situation closely and do whatever is within its power to mitigate the situation.
This is despite Namibia having the biggest crude producer as a neighbour, Angola, and so many oil discovery announcements in the country.
According to Negumbo, when he was asked why the five importers cannot import cheaply from Angola, he said Angola also does not refine substantially for themselves, but they also send their crude to be refined somewhere and subsidise it for their people.
Asked why Namibia was not considering refining oil given recent discoveries and Angola’s massive output, the mines officials said that there are so many variables to be assessed before the country can decide, which none are done at this stage.
Some of them are that the cost and benefit analysis for the refinery was never undertaken to date.
It will require billions of dollars to build one, and the energy transition face makes things even more complicated to embark on such investment.
On local oil reserves discovery, they are just news with minimal impact on the pump prices, and secondly, they cannot be used in the decision to build a refinery.
The team explained that they are merely geological discoveries and that the companies are yet to do appraisal wells to determine their commercial viability.
As a result, the country is not at liberty to invest in a refinery based on local oil discovery as more needs to be done.
For now, consumers are advised to keep saving up through the levies and capitalise on the energy fund so it can absorb some of the under-recovery cost for some months.
Since last year, April 2021 to January 2022, consumers’ savings through the country National Energy Fund has subsidised the under-recovery cost with more than half a billion dollars (N$645 million).
The consumers are just not saving for the fund, fueling their cars and machines alone; they are also paying 60 cents levy to repay a loan that the country took to build the oil storage.
Negumbo maintained that the storage is very important as it has a jetty, and it will serve the country when there is a supply disruption up to 40 days.
In terms of cushioning the country against oil price volatility, the team and the executive director could not provide much as the storage purpose was to cater during oil disruption and offer a jetty infrastructure for bigger tankers.
The ministry has also offered advice to fuel consumers to minimise their economic activities such as travelling to cut on expenditure as a way to go.
“We would therefore like to call on all the fuel consumers to guard against unnecessary travel to cut on expenditures,” stated Negumbo.
Email: erastus@thevillager.com.na
