Fuel prices will increase as of midnight on Wednesday when petrol will increase by N$1 per litre (p/l) and diesel by 70 cents p/l. This increase means the fuel pump prices at the port of entry of Walvis Bay will become N$11.35 p/l on petrol and N$11.83 p/l on diesel.
A Ministry of Mines and Energy statement noted that the price adjustments were made to ensure the orderly importation of fuel products into the country.
The main factors that influenced the ministry's decision were the exchange rate, the price per barrel, the cost of shipping and an increase in road user charges.
For the trading cycle running from 1 July to 24 July, the Namibia Dollar actually appreciated against the US Dollar to N$16.78 for every US Dollar, compared to N$17.11 in the previous month.
Meanwhile, product cost indicators showed that one barrel of Unleaded Petrol 95 (ULP95) traded at an average price of US$46.84, while one barrel of Diesel 50ppm traded at an average price of USD49.32.
"This indicates that the average barrel prices have increased during July 2020. This is also an indication that global demand may be gaining more-and-more momentum despite Covid-19 effects," read the ministry's statement.
In terms of the market indicators related to freight rates or the costs of shipping petroleum products from the international markets to the Namibian shore, the average costs decreased by approximately 20%. On average, the shipping costs dropped from 98 to 78 cents per litre on petrol from last month to the current review. In addition, on average the freight rates dropped from 108 to 85 cents per litre on diesel from the last month.
The ministry also indicated that the dealer margin for fuel service stations was adjusted in May 2020 by 50 cents per litre from 110 cents per litre to 160 cents per litre.
"This adjustment was made as a relief measure for fuel service station owners in consideration of the national lockdown and decrease in economic activities. The 50 cents relief was, granted only for three months due to national lockdown considerations. Now that the country has largely started to open-up internally, fuel consumption volumes have started to rise again, going from about 56 million litres to over 80 million litres per month in consumption.
Although this is not the usual peak of demand, the situation has drastically improved. Hence, the 50 cents relief has run its course and it will be discontinued. This adjustment will become effective on 5 August 2020".
Moreover, the Ministry of Finance approved a 4% adjustment of the road user charges, which are also part of the price of fuel products.
This means the levy on fuel products, which is collected by the Road Fund Administration, will be increased by 5 cents per litre from 136 cents per litre to 141 cents per litre and this adjustment will also become effective on 5 August 2020.