Windhoek
Fuel prices go down at midnight today largely because the energy ministry is able to use the accumulated dollars in the National Energy Fund (NEF) to subsidise fuel prices in the coming months.
Otherwise it would have been nigh impossible for the energy ministry to grant a decrease at a time when the Namibian dollar has lost its value to major foreign currencies, particularly the US dollar, since the Chinese devaluation of the yuan that sent global financial markets tumbling since last week.
It also helped that last week the US crude stockpile shot up, causing a fall in crude prices, and trigging concerns of overstocking of oil in international markets at a time when China, the biggest guzzler of oil, is faltering.
For the past months the exchange rate between the US dollar and rand, to which the Namibian dollar is pegged one-on-one, has been hurting importers of fuel into the country.
Recent weeks have however seen “substantial over-recoveries recorded to trigger a decrease and give local motorists a relief at the pumps,” the Minister of Mines and Energy Obeth Kandjoze said in a statement issued yesterday.
Thus when motorists and other consumers wake up tomorrow morning they would be able to save 30 cents on a litre of 95 octane unleaded petrol and 40 cents on a litre of diesel.
The decreases bring the Walvis Bay fuel pump price to N$10.69 for 95 octane unleaded petrol, N$10.42 per litre of diesel 500ppm and N$10.52 per litre of diesel 50ppm.
The energy ministry uses the energy fund to adjust the fuel prices in the country, increasing the prices when the import price is a little steeper than the retail price and decreasing the price when the import price goes lower than the domestic retail price.
The over-recoveries in the energy fund seem to have been so substantial that the energy ministry announced that, together with the decrease in fuel price, there would be an increase of 10 cents per litre on the energy fund levy towards the mobilisation of the N$4 billion needed to construct the oil storage facility in Walvis Bay, to ensure security of supply in the country during times of low supply.
Kandjoze noted that the energy fund has been requested by the technical committee on strategic projects to adjust its levy with 20 c/l in order to strengthen its capacity to finance the strategic fuel storage facility. “It is for this reason that the ministry has decided to grant a 10 c/l increase on the NEF levy to fast-track the mobilisation of funds for that national project,” Kandjoze said.
Kandjoze says it is also clear that supply and demand for oil no longer dictate the price, but this is now determined by financial markets and more importantly money flows tied to central bank policies.
“This can be ascertained by a session that saw prices fall as much as 6 percent after a Chinese equities rout sent global markets into a tailspin. The rand to which the Namibian dollar is pegged weakened 3.3 percent to R13.41/US$, the most since September 2011, data compiled by Bloomberg show. The exchange rate has a strong influence on the fuel pump prices in our country,” said Kandjoze.