Fuel price drop to bring some relief

07 May 2020 | Energy

OGONE TLHAGE

WINDHOEK



With fuel prices dropping by a further N$1 a litre, economists differed on whether this will indeed have a positive impact on Namibia's depressed economy.

Fuel prices for the month of May were decreased as global demand fell again, with people forced to stay home to limit the spread of the coronavirus. As Namibia exited its hard lockdown, some commentators felt that lower demand would result in benefits across the board.

Independent economist Klaus Schade said the reduction in fuel prices would help consumers of fuel.



Burden eased

“Any price reductions will ease the current burden on producers and consumers. The drop in prices will in particular benefit the fisheries and transport sectors that spend a large proportion of their input costs on fuel.”

However, for those using public transport, the effects of a lower fuel price were not as pronounced. “Non-motorists will not see any benefits, since public transport prices will remain unchanged or will be increased as taxis are only allowed to transport fewer passengers. Without the steep depreciation of the Namibian dollar against the US dollar, the decline would have been larger,” Schade said. “However, the other side of the coin is that some countries that are heavily reliant on oil revenue can turn into fragile or even failed states, which would have implications for regional stability.”



Hard to assess impacts

IJG head of research Eric van Zyl said it would be hard to see the impacts of the low pump prices at the moment.

“Generally, we would hope to see lower price inflation on goods as transportation costs reduce, but in the current economic climate there are additional supply and demand factors at play due to the coronavirus pandemic, and measures aimed at slowing the spread of the disease will impact the prices of various goods in different ways.

“It is thus difficult to say that the low fuel prices will be much of a boost to the economy, but it does come at a time where more Namibians will be returning to work and it will mean a lower monthly fuel bill,” Van Zyl said.

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