Another fuel bomb hits Namibia

As from tomorrow, motorists will pay N$2.50 per litre more for petrol and N$1.50 per litre extra for diesel, the ministry of mines and energy has announced.

This is the fourth fuel price increase for 2022, bringing it to a new all-time high.

The increase could have been worse, thanks to a temporary three-month reduction in fuel levies imposed last month.

The new fuel prices at Walvis Bay, which is the port of entry, will become N$20.40 per litre for petrol and N$21.43 per litre for diesel.

There is no doubt that every average Namibian consumer will be affected by the increase as fuel is a key input in various industries of the economy. Consumers can, therefore, expect an increase in the prices of goods and services.

Reacting to the announcement, head of research at Cirrus Capital, Robert McGregor, said businesses are bound to increase the costs of goods and services to make up for higher fuel prices.

“These price increases disproportionately impact lower-income households. Although high-income households tend to spend more of their income on fuel relative to low-income households, the latter spend an overwhelming majority of their income on basic goods, which are seeing price increases.

“They are more vulnerable to increased fares for public transport – especially as they are not able to substitute whether for basic goods to lower cost alternatives, or for transport,” he said.

Meanwhile, neighbouring South Africa’s fuel levy relief of R1.50 per litre is due to expire today.“South Africa’s cabinet is supposedly considering the matter, as letting it lapse would add an additional R1.50 to the price increase,” he said.

McGregor said the levy relief introduced last month has shielded Namibians from even larger increases.

Drivers

Mines and energy deputy minister Kornelia Shilunga pointed out that the fuel price increases are driven by events beyond government’s control as Namibia is a price-taker in the international oil market.

“The government is only in direct control at the levels of the domestic levies, taxes and margins regarding the price of fuel,” she said.

One of the drivers is that the global refining capacity has fallen significantly since 2020 due to the Covid-19 pandemic.

This, while world demand for oil has been picking up immensely following the worst of the pandemic, but global oil supply is still failing to catch up. Oil markets are also leaning towards an upward pricing trend as a pending import ban by the European Union on Russian crude is expected to further tighten global supply.

Moreover, calculations by the ministry indicated the average price for petrol over the period of 1 to 20 May is US$142.78 per barrel, compared to US$126.26 per barrel at the end of April, an increase of US$16.50. Additionally, the average price for diesel over the review period is US$152.15 per barrel, compared to US$150.12 per barrel at the end of April, a lower increase of about US$2 per barrel, she added.

The exchange rate figures for the period of 1 to 20 May indicate that the Namibian dollar has recorded a huge depreciation against the US dollar at N$15.96 per USD, compared to N$15.04 per USD at the end of April. This currency depreciation means the business of conducting international transactions is now more expensive, Shilunga said.