Fuel jumps N$1.30 /l in two months
01 March 2021 | Economics
Last month, the ministry of mines and energy pushed up the petrol and diesel price by 50c per litre.
The increases are bound to tug at Namibians’ pockets as transport carries the third biggest weight in the national consumer basket. Out of every N$100 in the consumer’s wallet, N$14.28 on average is spent on transport.
The operation of personal transport equipment, which includes the fuel price, has been in deflationary territory since April last year. However, it has moved from a peak of -7.9% in June and July 2020 to -4.7% in January 2021, according to data by the Namibia Statistics Agency (NSA).
Announcing the latest fuel price increase, the ministry of mines and energy said despite a stronger Namibia dollar against the US dollar, “the continuous and significant increases in barrel prices have far more significant implications for local oil consumers”.
The per-barrel-price of petrol across the international product market have in increased from about US$59.49 to about US$66.31 in the past month, while diesel rose from about US$58.98 to around US$65.80.
This resulted in an under-recovery of about 109c on petrol and some 111c on diesel. In January, the under-recovery was 102c and 105c respectively.
An under-recovery means that fuel was bought at a higher cost than the local set price for landing, or the basic fuel price (BFP). With an under-recovery, fuel is effectively sold to the consumer at a loss, with the National Energy Fund (NEF) subsiding the difference.
According to the ministry, the NEF has funded the under-recoveries for January to the tune of N$122 million, while the under-recoveries for February will cost the NEF about N$98 million.
Commenting on the latest price increase decision, the ministry said “these significant under-recoveries indicate that the current pump prices are not reflective of the actual prices in the market”.
On Wednesday, petrol will cost N$12.65 per litre at Walvis Bay, while diesel will be N$12.68 per litre.
“The ministry is cognisant of the fact that the increases in the local price of fuel will put more inflationary pressures on the prices of goods and services in the economy,” the ministry’s senior public relations officer, Andreas Simon, said.
“However, due to the major dynamics of demand and supply in the international oil market at the present time, demand-side oil price regulators will have to continue making these hard and painful decisions,” Simon said.