Some relief from the fuel price monster
Reduction in levies for three months
As from Thursday, motorists will be pay N$17.90 per litre for petrol and N$19.93 per litre for diesel at Walvis Bay which is the port of entry
Fuel prices in Namibia will decrease for the first time in 2022 after three consecutive increments, thanks to a reduction in levies.
The price of petrol will go down by N$1.20 cents per litre, while diesel will only fall by 30 cents per litre, the Ministry of Mines and Energy has announced.
As from Thursday, motorists will be pay N$17.90 per litre for petrol and N$19.93 per litre for diesel at Walvis Bay which is the port of entry. Fuel prices across the country will be adjusted accordingly.
Reacting on the announcement, Simonis Storm economist Theo Klein views the levy relief as a positive for households’ budgets that are under severe pressure from rising food prices, rising interest rates and elevated fuel prices.
Although petrol prices have been lowered, they remain 36.1% higher than 12 months ago. The levy relief might free up additional funds that can be spent on alternative goods, which is also a positive for the economy as consumption is 70% of gross domestic product (GDP).
The mines ministry has been consulting with the Ministry of Finance as well as other state institutions that derive revenue from the levies and taxes imposed on the price of petroleum products.
For the next three months, there will be a 50% reduction in the road user charges as well as the fuel and National Petroleum Corporation of Namibia (NAMCOR) levy. The Motor Vehicle Accident (MVA) Levy will go down by 25% from 50.3 to 37.725 cents per litre.
The approved reduction in the levies amounts to 135.375 cents per litre on each of the two products and based on the monthly fuel consumption level of about 89 million litres. The reduction of the levies amounts to about N$120.4 million per month in savings to the fuel consumer at the macroeconomic level, the mines Ministry said.
“Pressure mounted on the Namibian government to provide relief to local consumers after South Africa reduced their levies on fuel prices by R1.60 per litre earlier this month. The South African levy decrease will last for the next two months and is estimated to incur a revenue loss of about R6 billion for South Africa,” Klein said.
The latest calculations by the Ministry indicate that the average price for petrol over the period 1-25 April 2022 is USD125.034 per barrel compared to USD129.370 per barrel at the end of March 2022, a decrease of about USD4 over the review period. Additionally, the average price for Diesel over the period 1-25 April 2022 is USDI 48.788 per barrel compared to USD145.681 per barrel at the end of March 2022, a moderate increase of about USD3 per barrel over the review period.
Supply
Even before the Ukraine crisis broke out, diesel fuel was already in short supply due to a drop in global refining capacity. It is mainly this shortage coupled with the ongoing geopolitical tensions that has kept Diesel prices at record levels to this date. In addition, shipping costs are also on the upward trajectory following the bans imposed on the fleets of the Russian Federation.
Furthermore, the exchange rate figures for April indicate that the Namibian dollar has recorded another slight appreciation against the USD at N$14.8382 per USD compared to N$14.9549 per USD at the end of March 2022. This slight appreciation is, however, not very significant to the bottom line.
Therefore, after entering the above input factors into the fuel pricing model, the Ministry recorded a combination of over and under-recoveries on the two respective products, namely an over-recovery of 31 cents per litre on petrol and an under-recovery of 92 cents per litre on diesel.
The ministry, while also accounting for the over-recovery of 31 cents per litre on petrol, has resolved to allocate the extra surplus of 135.375 cents per litre for petrol.
It will allocate 42.575 cents per litre towards increasing the fuel equalization levy from 30.4 cents per litre to 72.975 cents per litre. This allocation is required to financially strengthen and further capacitate the National Energy Fund (NEF) to ensure security of fuel supply to the country. This allocation is also expected to boost the NEF collection to about N$21 .1 million per month from the sale of petrol for slate equalization purposes.
As for diesel, the ministry, has resolved to allocate the extra surplus of 135.375 cents per litre. It will allocate 12.575 cents per litre towards increasing the fuel equalization levy from 34.4 cents per litre to 46.975 cents per litre. This allocation is also required to financially strengthen and further capacitate the National Energy Fund to ensure security of fuel supply to the country. This allocation is further expected to boost the NEF collection to about N$28.1 million per month from the sale of diesel for slate equalization [email protected]
The price of petrol will go down by N$1.20 cents per litre, while diesel will only fall by 30 cents per litre, the Ministry of Mines and Energy has announced.
As from Thursday, motorists will be pay N$17.90 per litre for petrol and N$19.93 per litre for diesel at Walvis Bay which is the port of entry. Fuel prices across the country will be adjusted accordingly.
Reacting on the announcement, Simonis Storm economist Theo Klein views the levy relief as a positive for households’ budgets that are under severe pressure from rising food prices, rising interest rates and elevated fuel prices.
Although petrol prices have been lowered, they remain 36.1% higher than 12 months ago. The levy relief might free up additional funds that can be spent on alternative goods, which is also a positive for the economy as consumption is 70% of gross domestic product (GDP).
The mines ministry has been consulting with the Ministry of Finance as well as other state institutions that derive revenue from the levies and taxes imposed on the price of petroleum products.
For the next three months, there will be a 50% reduction in the road user charges as well as the fuel and National Petroleum Corporation of Namibia (NAMCOR) levy. The Motor Vehicle Accident (MVA) Levy will go down by 25% from 50.3 to 37.725 cents per litre.
The approved reduction in the levies amounts to 135.375 cents per litre on each of the two products and based on the monthly fuel consumption level of about 89 million litres. The reduction of the levies amounts to about N$120.4 million per month in savings to the fuel consumer at the macroeconomic level, the mines Ministry said.
“Pressure mounted on the Namibian government to provide relief to local consumers after South Africa reduced their levies on fuel prices by R1.60 per litre earlier this month. The South African levy decrease will last for the next two months and is estimated to incur a revenue loss of about R6 billion for South Africa,” Klein said.
The latest calculations by the Ministry indicate that the average price for petrol over the period 1-25 April 2022 is USD125.034 per barrel compared to USD129.370 per barrel at the end of March 2022, a decrease of about USD4 over the review period. Additionally, the average price for Diesel over the period 1-25 April 2022 is USDI 48.788 per barrel compared to USD145.681 per barrel at the end of March 2022, a moderate increase of about USD3 per barrel over the review period.
Supply
Even before the Ukraine crisis broke out, diesel fuel was already in short supply due to a drop in global refining capacity. It is mainly this shortage coupled with the ongoing geopolitical tensions that has kept Diesel prices at record levels to this date. In addition, shipping costs are also on the upward trajectory following the bans imposed on the fleets of the Russian Federation.
Furthermore, the exchange rate figures for April indicate that the Namibian dollar has recorded another slight appreciation against the USD at N$14.8382 per USD compared to N$14.9549 per USD at the end of March 2022. This slight appreciation is, however, not very significant to the bottom line.
Therefore, after entering the above input factors into the fuel pricing model, the Ministry recorded a combination of over and under-recoveries on the two respective products, namely an over-recovery of 31 cents per litre on petrol and an under-recovery of 92 cents per litre on diesel.
The ministry, while also accounting for the over-recovery of 31 cents per litre on petrol, has resolved to allocate the extra surplus of 135.375 cents per litre for petrol.
It will allocate 42.575 cents per litre towards increasing the fuel equalization levy from 30.4 cents per litre to 72.975 cents per litre. This allocation is required to financially strengthen and further capacitate the National Energy Fund (NEF) to ensure security of fuel supply to the country. This allocation is also expected to boost the NEF collection to about N$21 .1 million per month from the sale of petrol for slate equalization purposes.
As for diesel, the ministry, has resolved to allocate the extra surplus of 135.375 cents per litre. It will allocate 12.575 cents per litre towards increasing the fuel equalization levy from 34.4 cents per litre to 46.975 cents per litre. This allocation is also required to financially strengthen and further capacitate the National Energy Fund to ensure security of fuel supply to the country. This allocation is further expected to boost the NEF collection to about N$28.1 million per month from the sale of diesel for slate equalization [email protected]
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