Prices of fuel have gone up by an average of 32 cents per litre this week. The announcement by the Ministry on Mines and Energy came into effect midnight on Wednesday.
The main driver was cited as increased demand in oil as various countries continue to boost their economic activity through economic expansion such as road and bridge construction, fuelling agricultural machines and mining activities. This has become especially true for the two countries with the largest appetite for oil namely China and the USA. The market of Namibia's main supplier of oil (Asia) saw prices of crude oil well above US$130 per barrel during the month of February which was indicative of the growing rise in demand for oil.
In a statement made by the Minister of Mines and Energy the exchange rate is also fingered as a culprit. "The exchange rate between the Namibia dollar and the US dollar is still weak and it hovered close to N$ 8.90 throughout the period under review. It is for this reason that the local market pulled through with huge under-recoveries at the end of February, half of which were passed on to the consumers in order to recover the costs incurred. The remaining half will be paid for by government through the National Energy Fund." He explained that the National Energy Fund is employed to equalise fuel price movements and to subsidize under-recoveries.
Speaking to the Economist, Ms Victoria Shiimi, who works for the Directorate of Energy at the Ministry of Mines and Energy explained some of the factors that come into play when determining local fuel pump prices. "The International market for oil prices is the greatest factor in our consideration. What most people do not realize is that the route taken for the oil to reach Namibia also bears several costs. The oil taken from the European and Asian markets travels by sea to South Africa, Durban. From here, it is then transported to the Walvis Bay harbour in smaller vessels which can be handled at the local port. All these transportation costs are therefore implicit in the final fuel pump value." The Chief Energy Economist further explained that without the National Energy Fund, consumers would have had to face an increase of 60 cents across all grades.
The fuel pump prices which have been adjusted countrywide currently stand (after the increase) at N$ 10.94 per litre for 93 octane lead replacement petrol, N$ 11.05 per litre for 95 octane unleaded petrol and N$ 11.26 per litre for diesel.
"Oil prices are very volatile sometimes changing more than once during the day. Situations like political instability often lead to futher price changes. As an example, certain countries have recently been accused of holding back the supply of oil in order to spike up prices with government officials being retrenched for those actions, "said Shiimi.