Significant under-recoveries in the domestic fuel distribution sector is one of the main reasons for the increase in local fuel prices. The energy ministry yesterday announced that petrol prices will increase by N$1.20 cents per litre and diesel will go up by N$1.70 cents per litre. The National Energy Fund will absorb the entirety of the under-recoveries on behalf of fuel consumers, through the fuel equalisation levy.
The effective date for the latest increases is Wednesday, 06 September 2023 that will see Walvis Bay pump prices climb to N$20.98 per litre for petrol, diesel 50 ppm will jump to N$20.75 per litre and diesel 10 ppm will be N$20.95 per litre. Fuel prices across the rest of the country will be adjusted accordingly.
Making the announcement yesterday, the ministry emphasised a pressing need to ensure the fuel prices are best reflective of the market dynamics to ensure the efficient security of supply.
The ministry further highlighted that Namibia is a price taker in the international oil market, and actions or decisions that emanate from the supply forces, such as the Organisation of Petroleum Exporting Countries (OPEC), have a significant impact on our local fuel prices.
“In June, OPEC+ members agreed to limit the global oil supply, as part of this effort, Saudi Arabia committed to an extra voluntary reduction in output for July, which would be further extended towards September. This resulted in a persistent decrease in oil inventories, to that end, the global oil demand is scaling record highs, boosted by strong summer air travel, increased oil use in power generation and a surging increase in petrochemical operations in China. Consequently, the prevailing high oil prices are driven by excess demand coupled by shortage of supply,” the ministry explained via a statement.
Ministerial calculations indicate that the average price of Unleaded Petrol 95 during August 2023 was at US$110.507 per barrel, compared to US$102.231 per barrel at the end of July 2023. This represents an increase of about US$8 per barrel or 7.8% over the review period.
In addition, the average price of Diesel 50ppm during August 2023 was at US$118.128 per barrel (compared to US$100.231 per barrel at the end of July 2023, indicating a significant increase of about US$18 per barrel or 18% over the review period.
Furthermore, the exchange rate figures for August 2023 indicated a 3.7% depreciation of the Namibia Dollar against the United States Dollar.
Based in these figures, the ministry recorded significant under-recoveries on petrol and on both the diesel products. Specifically, there was an under-recovery of 240 cents per litre on petrol, 354 cents and 348 cents per litre on diesel 50ppm and diesel 10ppm, respectively.