Falling international oil prices coupled with the strengthening of the Namibia dollar against the United States dollar are two of the main factors that enabled the energy ministry to reduce local fuel prices for September.
As of tomorrow, consumers will finally get some relief from record-high domestic fuel prices when petrol will decrease by N$1.20 per litre, while diesel will drop by 65 cents.
This means that as of Wednesday, the new fuel prices in Walvis Bay will become N$ 21.08 per litre for petrol and N$22.12 per litre for diesel while fuel prices across the rest of the country will be adjusted accordingly.
Moreover, the ministry also decided to extend the temporary reduction of road user charges, the Motor Vehicle Accident (MVA) Fund levy and the Namcor levy until further notice, which is another determinant in passing on much-needed relief to consumers.
The ministry has also resolved to increase the industry margin for fuel wholesalers by 20 cents per litre from 108 cents per litre to 128 cents per litre on all products effective 7 September 2022.
According to the ministry, additional factors that contributed to lower international oil prices, and subsequently lower local fuel prices, emanated from a possible return of sanctioned Iranian oil exports to global markets as well as concerns about rising US interest rates that could continue to weaken fuel demand.
“Should the negotiating parties reach consensus on an Iran nuclear deal, this will entail that more oil will start flowing into the market and possibly cause prices to fall over the near-term.
However, the situation could prove problematic on the other side of the coin as falling US crude and product stockpiles have already started to add to the upward pressure on prices, as well as the possibility that OPEC and its allies will cut production to support an increase in prices for the benefit of crude oil suppliers,” read a ministerial statement.
The average price for Unleaded Petrol 95 during most of August was at US$111.078 per barrel compared to US$128.161 per barrel at the end of July 2022.
This represents a significant decrease of about US$17 during the review period. However, during the same period, the international price of diesel decreased by only about US$5 from US$139 to about US$134 per barrel. During the same timeframe, the Namibia dollar appreciated against the US dollar, which had a positive effect on import parity price calculations and local fuel pump prices.
After entering the above input factors into the fuel pricing model, the ministry recorded high over-recoveries of about 300 cents per litre on petrol and an over recovery of about 100 cents per litre on diesel.