The reluctance by the Organisation of Petroleum Exporting Countries (OPEC) to increase supply, coupled with a slight depreciation of the Namibia dollar, has placed the mines and energy ministry at a crossroads between healthy National Energy Fund (NEF) finances and increased pressure on consumers.
As such, the ministry said it was left with no option but to increase fuel prices by 70 cents a litre as of Wednesday, 1 December. This marks the fourth consecutive month of fuel increases.
“The ministry found itself at a crossroad during the review period. After exhausting all avenues, and ultimately for the sake of keeping the NEF balance healthy, the ministry has decided to increase fuel pump prices for petrol and diesel by 70 c/l, effective from 1st December 2021,” read a statement from ministry spokesperson Andreas Simon.
This latest increase in a depressed economy, reeling from the effects of a global pandemic, exacerbated by inflationary pressure, and pushed up by over-extended supply lines will see petrol pump prices in Walvis Bay rise to N$15.65 cents a litre, while diesel will increase to N$15.58 c/l.
“After a series of OPEC’s meetings, members have still not agreed to increase supply into the market, owing to prospects of surging Covid-19 cases, which will depress demand.
As a result, global oil prices remain high, although they fell slightly during the period under review. Refined petrol remains high, trading at an average of US$94 in November, whereas diesel traded at an average of US$92,” the statement read.
Simon continued the local currency depreciated slightly against the US dollar from an average of N$14.85 in October to an average of N$15.35 in the period under review. He explained that since fuel pump prices increased only minimally in November, in comparison to the under-recoveries recorded, the depreciation pushed up the under-recoveries brought forward from the previous month.
Owing to these factors, which played out during the month of November, an under-recovery of 110.063 cents per litre was recorded on petrol, whilst diesel recorded an under-recovery of 106.902 cents per litre during November.
These under-recoveries will be paid by the NEF. Simon added government, through NEF’s fuel equalisation mechanism, will pay over N$154 million of under-recoveries recorded during October.
“Government holds the position to ensure that an undue burden is not exerted onto the Fund in order to safeguard its long-term sustainability. It is the intent of government to end the year on a positive note and start the coming year 2022 on a positive note.
The public is advised that the fuel price review process is one that requires a great understanding of forecasting, since government cannot be too certain on how the market could perform in the future,” read the statement.