Namibian consumers and motorists were up in arms yesterday as a fuel increase was confirmed for Wednesday, 3 November by the mines and energy ministry. The November increase of 30 cents on petrol and 70 cents on diesel follows a 30 cents increase for both fuels in October. By April this year, Namibians were already burdened with three increases for 2021 alone.
According to a ministerial statement, the latest fuel hike is attributed to international oil prices that have recently risen to their highest level since 2018 as global oil demand is now poised to recover from the Covid-19 pandemic.
Also blamed for the latest increase are shortages of natural gas and coal from Asia to Europe, which are driving additional demand for oil products in power generation while supply has remained tight.
The ministry noted it has observed that the benchmark Brent crude oil peaked at US$86.04, the highest price since October 2018 and pointed out that another benchmark crude oil, the US West Texas Intermediate, peaked at US$83.73, which is the highest price since October 2014.
“These significant increases in the prices of crude oil, which is the raw material from which petrol and diesel are extracted through a refining process, will automatically be reflected in the prices of the refined commodities. Therefore, during October 2021, the per barrel prices of petrol and diesel across the international product market have increased significantly by US$10 to US$12 from about US$85.87 to about US$95.23 and from about US$81.190 to US$93.60, respectively. An increase in international barrel prices usually has the negative effect of increasing the under-recovery level in the final BF-P (Basic Fuel Price) calculations, signaling a need for an increase in local fuel pump prices in the country,” read the statement issued by mines and energy spokesperson, Andreas Simon.
The ministry also emphasised the currency exchange market where the Namibia dollar recorded a slight depreciation against the United States dollar at roughly N$14.8136 per US$ during the month of October 2021 versus the average exchange rate for September 2021 at N$14.5826 per US$.
“The latest calculations are, therefore, indicating an under-recovery of 132 cents on petrol and an under-recovery of 154 cents on diesel. There is, therefore, a need to ensure that a fuel price that is best reflective of the movements of the market is maintained to ensure the security of fuel supply to the country,” the statement reads.
The statement further noted that the National Energy Fund (NEF) will cover the entirety of the under-recoveries recorded for the month of October 2021 on behalf of fuel consumers through the fuel equalisation levy. This amounts to approximately over N$120 million.
The ministry also reminds the public that Namibia is a price-taker in the international oil market.
“In other words, the country does not yet have crude oil resources and crude oil refineries of its own through which it can hedge against these oil price volatilities apart from the National Energy Fund fuel equalisation mechanism. It is important to understand that, the government is only in direct control at the levels of the domestic levies, taxes, and margins on the price of fuel. Whilst price-makers such as the Organisation of Petroleum Exporting Countries (OPEC) and other major oil producers such as the Russian Federation heavily influence the prices of petroleum products,” the ministry explained.