WINDHOEK – A local economic analyst, Klaus Schade, seems to have hit the nail squarely on the head with his prediction that fuel prices will continue to increase for the rest of the year. The Ministry of Mines and Energy yesterday confirmed that fuel pump prices for October, 2018, will increase with 50 cents per litre on all petroleum products at one minute past midnight on Wednesday, October 3, thereby edging pump prices ever closer to the N$14 per litre mark.
Schade, a research associate at the Economic Association of Namibia, has cautioned that as in the past months, this latest fuel price increase will push transport inflation higher into double-digit figures, which will ultimately contribute to rising inflation rates. “Motorists need to explore ways to use transport equipment more efficiently in order to cushion against rising costs of transport,” said Schade.
“The strong price increases on the global market and the domestic market put substantial pressure on businesses due to cost increases and on consumers that have to spend more on fuel, unless they change their behaviour, and have therefore less disposable income. There are already concerns globally that the pace of oil price increases could result in a significant slowdown of the global economy, since both producers and consumers have little time to adjust production and consumption to these hikes,” said Schade.
Last month fuel prices increased by 40 cents a litre due to the continued depreciation of the Namibia Dollar against major currencies as well as oil supply-side uncertainties. According to yesterday’s ministerial statement, which confirmed that this latest fuel price increase is attributed to the very same factors, the new pump prices at Walvis Bay are N$13.45 per litre for petrol, N$13.78 per litre for diesel 500ppm and N$13.83 per litre for diesel 50ppm.
According to Tom Alweendo, Minister of Mines and Energy: “Two major factors affect, adversely, our local pump prices: The international prices of refined oil and the exchange rate between the Namibian Dollar against the US Dollar in which oil is priced.”
Alweendo noted that the past months have seen both factors play out and, as a result, fuel pump prices are increasing at a faster pace than Namibia’s capacity to contain them. Since the beginning of the year, global oil prices have been on an increasing trend, stretching from US$77 per barrel of refined oil in January to US$91 in September. Predictions are that they are headed to triple digits by the end of the year.
Also, the exchange rate between the Namibia Dollar against the US Dollar has depreciated from N$12.20 in January to N$14.71 in September, 2018. Alweendo stated that filtered through the local market, these two factors have contributed immensely to the recent increases in the local pump prices as it has become too expensive to ship oil in bulk to Namibia.
“The National Energy Fund (NEF) has paid and continues to pay a fair share of the full costs incurred by bulk fuel importers on behalf of the consumers.
It has paid a larger potion than consumers in the past few months despite the increases, and this month is no different. Provisional figures show that more than N$1.30 per litre was incurred by bulk oil importers to bring fuel to Walvis Bay throughout the month of September, and the National Energy Fund will pay more than 80 c/l of that amount. By increasing fuel pump prices, it is not the intention of government or petroleum product suppliers, or fuel station owners to generate more income, but rather, to recover the cost already incurred by bulk oil importers to bring fuel to Namibia,” read Alweendo’s statement.
International oil prices exceeded US$80 per barrel towards the end of September, despite pressure by the US administration, in particular through Saudi Arabia, on OPEC to increase output in order to prevent prices to rise further.