Local fuel prices will increase for already the third time this year on Wednesday, 7 April 2021, when both petrol and diesel will go up by 50 cents a litre taking Walvis Bay pump prices of petrol to N$13.15 per litre and diesel to N$13.18 per litre. This follows 50 cents a litre increase in February and 80 cents a litre increase in March, bringing the cumulative increase for the year to N$1.80 a litre.
The mines and energy ministry stated it is cognisant of the fact that the increases in the local prices of fuel will continue to put more inflationary pressures on the prices of goods and services in the economy. However, it added that due to the major dynamics of demand and supply in the international oil market, demand-side oil price regulators “will have to continue making these hard and painful decisions”.
While the ministry attributes the latest increase to an unstable international oil market that has seen prices balloon by 30% so far this year, the three local fuel increases are sure to have an adverse impact on a Namibian economy weakened by recession and decimated by Covid-19.
“The major price instabilities in the international oil market have not yet stabilised over the last three months. Firstly, the ministry has observed that this year alone, the prices of oil have increased by more than 30% due to the steadfastness of OPEC and other major producers to keep oil production to a certain minimum. Secondly, oil demand is consistently recovering with many economies that are optimistic about emerging from the coronavirus crisis. Thirdly, the biggest economies in the world such as China, the USA, and the EU are expected to record significant growth in the current year after major downturns in 2020. This projected economic growth will be accompanied by a huge demand for oil products, further pushing international oil prices upwards,” read a statement from mines and energy spokesperson, Andreas Simon.
The ministry also factored in the exchange rate, which has seen a minor depreciation of the Namibia dollar against the US dollar, which traded at roughly N$14.9 per USD during March 2021 compared to the average exchange rate of N$14.7 for February 2021.
However, persistent and significant increases in international barrel prices that have a major impact on the local oil market have been cited as the most noteworthy factor.
During March, the per barrel prices of petrol across the international product market increased from about US$67.51 to about US$74.21 while those of diesel increased from about US$66.73 to about US$69.95. Based on these reasons, the ministry indicated a need for an upward adjustment in the local fuel pump prices.
Moreover, the ministry indicated that current pump prices are still not reflective of actual market prices in the market as the local retail industry still recorded an under-recovery of 117 cents on petrol and 85 cents on diesel.
Also, the ministry noted that the National Energy Fund (NEF) will fund the under-recoveries recorded for February 2021 to the tune of N$107.4 million and will also have to avail about N$90 million to finance the under-recoveries recorded for March 2021.