With consumers still holding their breath in anticipation of much-needed reprieve from sky-high local fuel prices, the mines and energy ministry yesterday confirmed consultations are still ongoing with relevant stakeholders.
Consultations were initiated with the finance ministry and other State institutions deriving revenue from levies and taxes imposed on the price of petroleum products with the aim to soften the burden on ordinary Namibians.
At the end of March, the energy ministry announced that the consultations were already at an advanced stage and expected to be finalised during April. This was stated by deputy minister Kornelia Shilunga when she announced the country’s largest-ever fuel increase, namely N$1.95 extra per litre on petrol and N$2.95 extra per litre on diesel, which took effect on Wednesday, 6 April.
“Kindly note that the consultation between MME and the Ministry of Finance is still ongoing. MME will pronounce itself once that process is concluded,” Energy Fund director in the ministry, Saima Neke, responded yesterday upon enquiry from New Era.
Levies imposed on Namibian petrol and diesel prices include a customs and excise duty for the SACU Revenue Pool; National Energy Fund fuel levy (comprising the fuel equalisation levy, Namcor levy and National Oil Storage Facility levy), road user charges (which go to the Road Fund Administation (RFA) for road maintenance; fuel tax, which is collected by the Ministry of Finance for the State Revenue Fund; and the Motor-Vehicle Accident (MVA) Fund levy, which is used to finance the activities of the MVA such as providing financial assistance to road accident victims.
Other local cost elements that push up the cost of fuel include the dealer margin for service station owners and the wholesaler margin for oil importers and bulk distributors, as well as other logistics costs and charges such as the service differential and storage fees.
Additionally, the pump prices include the road rates for delivery by oil trucks, and the rail rate for delivery by TransNamib.
At that time, economist in the energy ministry Abednego Ekandjo confirmed that the ministry was exploring several possible options involving the revision of levies and taxes on petroleum products.
“However, it must be noted that levies and taxes imposed on petroleum products are also serving to fund other equally important activities such as the maintenance of roads via road user charges, and the national budget via the fuel tax. Discussions on this matter are already underway with all relevant stakeholders, and the public will be informed of the outcomes in due course,” Ekandjo stated.
Meanwhile, at this week’s International Energy Conference held in Windhoek, energy minister Tom Alweendo noted that one of the biggest challenges in the energy sector is the recent drastic increase in the fuel price, occasioned by geopolitical tension in Eastern Europe.
“As a result, the international oil markets underwent a period of high price volatility, especially during the first and second weeks of March. Between February and March this year, the price of crude oil reached a high of US$140, compared to US$75 in December 2021. It is, however, encouraging to note that the price of crude is currently around US$100. If this trend continues, we are hopeful that the fuel price will start to come down,” Alweendo stated.
The mines minister also lamented the illegal importation of fuel from Angola. “This is an increasing trend, and it has serious negative impacts on the economy. For example, our roads are being maintained by a fuel levy that is collected from the purchase of fuel from fuel retailers. However, when motorists buy illegally-imported fuel, no levy is being collected. As a result, our ability to maintain our roads is diminished,” he warned.
Alweendo also addressed calls for Namibia to buy cheaper fuel from its northern neighbour. “The fact is that Angola buys 80% of its fuel needs from the same international market where we buy our fuel, and they buy it at the same price. It, therefore, does not make any sense for Angola to sell us fuel at a cheaper price than what we currently pay.
The only reason why fuel is cheaper in Angola is that they make use of the revenue they receive from the export of their crude oil to subsidise the price to the consumer.”
Moreover, the global oil market has been heavily disrupted by the Russian military operation in Ukraine, resulting in fluctuating prices. And, while the oil price appears to have stabilised in the US$100 a barrel region, it still remains highly sensitive to shocks.
Major traders are said to be looking to cut away from Russian oil supplies in May, while other oil-producing nations, such as Libya, are gearing up to increase production. Reuters yesterday reported that traders are considering a larger-than-expected increase in US oil stocks against tightening global supply, which is causing prices to cool.
However, the outlook for the price per barrel remains slanted upward as high demand remains consistent amidst tight supply.