By Petronella Sibeene WINDHOEK Motorists will receive an unexpected bonanza in the form of a decrease in the fuel price by N$0.26 cents a litre from next week. This good news was announced by the Ministry of Mines and Energy yesterday, after much speculation based on global trends in the price of crude fuel. The new price comes into effect from Wednesday next week. Mines and Energy Minister, Erkki Nghimtina, announced the price drop in a statement yesterday. This is the first fuel decrease after a series of increases this year. On 18 January 2006, the ministry hiked fuel prices for the first time this year by 16 cents per litre and by August 2006, fuel costs had risen to 50 cents per litre. The increases were necessitated by the international crude oil prices that had reached a record high, ranging from US$75 to US$78 per barrel due to the violence in the Middle East involving mainly Israel and the Hezbollah. Other factors such as the unrest in the oil-producing delta region in Nigeria, and others, also contributed to the series of fuel increases. Yesterday, Nghimtina announced the Namibian fuel pump price decrease was necessitated by the Namibian dollar appreciation against the US dollar, the decrease in the international crude oil prices and the over-recovery experienced in the local market. Based on that, the minister said, both 93 Octane Lead Replacement Petrol (LRP) and 95 Octane Unleaded Petrol (ULP) prices will decrease by 26 cents per litre while diesel will drop by 33 cents per litre. In Walvis Bay, where fuel prices are always better compared to other towns across the country, 93 LRP will cost N$6.16 from N$6.44, while 95 ULP will cost N$6.18 per litre from N$6.42. Diesel currently selling at N$6.50 will go for N$6.17. "Pump prices at various inland destinations countrywide will also be changed accordingly," he said. This fuel price decrease will take effect at 00h01 on Wednesday 18 October. The minister further explained that during August 2006, the average Namibian dollar to US dollar exchange rate strengthened slightly. Coupled with the fall in crude oil prices from over N$78 to below US$60 per barrel, this had a positive effect on the unit over-recovery, which led to the stabilizing fuel price in the local market. Nghimtina however cautioned that the favourable average exchange rate and the softening of international crude prices could be short-lived as the US dollar started strengthening against the local currency in September through to the current month. The minister also revealed that members of the Organization of Petroleum Exporting Countries (OPEC) are envisaging curtailing their crude output to reduce stock build-up in a bid to revive the falling crude oil prices and a weakened demand brought about by persistently high crude prices in the previous quarter of 2006. Portfolio Manager for RMB Asset Management Namibia, Martin Mwinga, explained that the reduction in the petrol price would bring relief to consumers through additional income that they could save on petrol, and to use that extra income to service their debts or spend more in the economy. This will inevitably contribute to expansion from the expenditure side of the economy. Moreover, the lower income group who use the services of taxis and buses will save, once taxi fares come down. Big sectors such as fishing, tourism and retailing will benefit from the reduction - as higher petrol prices curtailed their production and operating activities. "The government is also a major consumer of petrol and a reduction will help reduce the petrol expense bill of government. The reduction will also lessen pressure on inflation. Overall, the reduction comes at the right time when consumers are under pressure," he said. The rising interest rate however, with the expected increase of 50 basis points (0.5%) by today, will spoil the party, as the savings that consumers make on reduced petrol prices, will be wiped out, and which interest rate will increase the costs of home- and other loans. Nevertheless, Mwinga believes the economy will be better off with a lower petrol price and low inflation. The rise in the interest rate is intended to keep inflation low and stable and thus the rise in the interest rate and reduction in petrol price should benefit consumers in the long-term, although the interest rate might have a negative effect in the short term.
2006-10-12 00:00:00 11 years ago