Windhoek — The fuel price will go down by one dollar per litre for petrol and 40 cents per litre for diesel on December 05, 2018, bringing some much-needed relief to Namibian consumers who are reeling from slow economic recovery and increasing inflation.
However, a local economist has cautioned that despite this minor respite, Namibia still need to drastically pursue policies and strategies to promote move to electrical vehicles and equipment to free the country from the grip of the global oil cartel.
"Lower fuel prices should not result in complacency on the part of consumers, producers and policy makers to embark on more fuel-efficient transport and production equipment and, moreover, move to electrical vehicles and equipment.
Such a shift will not only reduce Namibia's dependency on oil imports, but support our Growth at Home Strategy, by harnessing our own natural resources such as solar, wind, biomass and wave power to generate electricity," said Klaus Schade, a research associate at the Economic Association of Namibia.
In his commentary on the latest fuel price decrease, Schade said policy makers need to take the initiative to design a joint strategy to promote the use (and production) of electrical vehicles not only in Namibia, but in the southern African region.
He noted that Namibia and the southern African region are rich in lithium and cobalt deposits, which are the main inputs into the production of lithium-ion batteries that power electrical vehicles.
"Instead of exporting the minerals as raw materials, policy makers need to design a strategy to add value to the minerals and produce the batteries in the region," Schade implored.
The main factors for the December relief at the pumps are increased global oil supply, mainly by OPEC and Shale oil producers in the USA, coupled with a slowdown of the global economy that reduces the demand for oil - and other commodities.
The average Europe Brent oil price dropped by 18.4 percent in November compared to October to US$66.16 per barrel. Daily oil prices declined even further to below US$60 per barrel at the end of November 2018, but prices remain 5.5 percent higher than in November 2017.
The increased global supply was spurred on by the Namibia dollar appreciating on average by 2.8 percent in November to N$14.09 per US dollar compared to the monthly average of N$14.50 per USD in October 2018. Both factors contributed to lower landing costs of fuel in Namibia.
"The fuel decrease will ease the burden on the consumer during the upcoming festive and holiday season. The drop in fuel prices is more generous than the previous under-recoveries would have suggested. However, the current drop in oil prices highlights once more the volatility in the global oil market that is influenced not only by the performance of the global economy, but also by geopolitical factors such as the tensions in the middle east," said Schade.
Schade also pointed out that current declining oil prices are mainly caused by a global slowdown of the economy due to continuing uncertainties surrounding the global trade system, which is not good news for Namibia.
"Slower global economic growth results in lower demand for basic commodities and hence lower prices, which hits commodity exporters such as Namibia. Furthermore, lower oil prices will slow down the recovery of the Angolan economy and subsequently the Angolan demand for Namibian goods and services," Schade concluded.