Figures from the mines and energy ministry show that during March 2024, global petrol prices increased by 2.7% while international prices for diesel 50ppm decreased by 2.64% ,and diesel 10ppm decreased by 2.46%. On top of this, the exchange rate figures for 1 to 25 March indicated a 0.93% appreciation of the Namibia dollar against the United States dollar.
This means the Namibia dollar was almost 1% stronger at the end of March 2024, compared to the end of February 2024.
Despite these favourable factors, the ministry noted significant under-recoveries on both petrol and diesel products in the domestic market, amounting to an under-recovery of about N$2.30 per litre on petrol and under-recoveries of about N$1.20 on diesel 50ppm, and approximately N%1.13 per litre on diesel 10ppm. An under-recovery happens when fuel consumers pay too little during a specific period, whilst an over- recovery means consumers are paying too much.
Under-recoveries experienced during March 2024, combined with an increase of 2 cents per litre on the Namport levy, resulted in the ministry increasing petrol by N$1.52 per litre, and both grades of diesel by 72 cents per litre. These increases came into effect yesterday.
"Global oil prices are experiencing an upward trend due to a reduction in the supply of oil brought about by geopolitical tensions in the major oil markets, fewer drilling rigs that are in operation, and uncertainty surrounding oil production...The ministry wishes to highlight that Namibia as an oil-importing country is exposed to the developments in international oil market prices. The volatility in the supply and demand of fuel in the global oil markets has a notable impact on our local fuel prices," read a statement from the office of the mines and energy executive director.
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Commenting on this week's hefty fuel increase, independent economist Joseph Sheehama said the move is shocking on already-struggling consumers.
"This will trigger inflation as well. The oil price increases can stifle the growth of the economy through their effect on the supply and demand for goods other than oil. Furthermore, increased oil prices can depress the supply of other goods because they increase the costs of production. Oil price increases are generally thought to increase inflation, and reduce economic growth. A rise in prices impacts the current account deficit, which means the value of imported goods and services exceeds those of exported goods," he stated.
Sheehama added that the rising oil prices will continue to push up prices at the pump for consumers, and add to inflation across the domestic economy.
"Therefore, the inflation rate will add to pressure on the Bank of Namibia to consider increasing interest rates to cool the economy," he cautioned.
