Consumers to pay more for transport this month

PHILLEPUS UUSIKU

The Ministry of Mines and Energy announced that both diesel and petrol prices will increase by 50 cents per litre for the month of February 2021.

The new fuel prices in Walvis Bay which is the port of entry will become N$ 11.85 per litre for petrol and N$ 11.88 per litre for diesel. These adjustments are effective at OOh01 tomorrow.

According to Andreas Simon, the spokesperson of the ministry, Namibia is finding itself in a very volatile international oil market at present.

Firstly, the exchange rate has not been favourable during the course of January 2021. The local currency traded at about N$ 15.09 per USD compared to about N$ 14.85 per USD throughout December 2020.

Secondly, the prices of petrol and diesel across the international product market have also gone up significantly, owing mainly to supply cuts by OPEC's biggest producer.

From last month, the barrel price of petrol increased from roughly USD 52.74 to about USD 59.18 while that of diesel increased from about USD 54.47 to about 58.85 during the current review. Due to these reasons, the current review is indicating a need for an upwards adjustment in the local fuel pump prices, he pointed out.

Demand, Supply

The current review has an under-recovery of about 102 cents on petrol and about 105 cents on diesel.

In addition to these under-recoveries, the ministry further wishes to inform the public that it has resolved to adjust the dealer margin on all products for the service station operators by 3 cents per litre from 1 10 cents per litre to 113 cents per litre. This adjustment is in line with the general inflation rate for 2020 of about 2.2%, he said.

According to the Namibia Statistics Agency (NSA) Consumer Price Index (CPI) statistics, the transport sector weight 14.28 points out of 100. This implies that on average, for every N$ 100 that a consumer has in his or her wallet, they are likely to spend N$ 14.28 spend on transport.

For the last three months of 2020, there was a deflation in the transport sector as prices decreased recording an average rate of -1.2%.

Andreas notes that the last review also had under-recoveries, and although those were moderate in comparison to the current figures, the ministry resolved at that time not to increase fuel prices considering that seasonal farming activities in most of the country were just kicking-off and a lot of traveling from various holiday destinations was taking place.

Smart Spending

Commenting on the announcement, Bruce Hansen the managing director at Simonis Storm said, the decision will be an added burden to the already distressed consumers.

Consumers will have to pay more for transport, whether for their own or public transport. Fuel will take a larger part of the consumer’s spending as more will be spent on it then on other goods and services.

“Rising fuel prices increase transport costs, leading to higher prices of goods, meaning the consumer has to fork out more money for the same amount of goods, adding more pressure. We should expect inflation to return,” he said.

It must be mentioned that the diesel and petrol prices are still below the pre-Covid levels (diesel 11.88 on 01.02.21 vs 13.63 on 01.01.20) (petrol 11.85 on 01.02.21 vs 13.05 on 01.01.20). The added 50c will still be below the pre-Covid levels, he pointed out.

Hansen notes that economic activity is forecasted to pick up as the world gets to grips with the management of the pandemic which will increase the oil price and hence fuel prices.

Over the long term the South African rand is expected to depreciate against the major global currencies, increasing local pump prices and fuelling inflation.

Consumers will have to remain cautious with their financial resources. Hansen advised consumers to buy necessities and cut down on luxury goods, less driving, increase savings if possible and invest their hard-earned cash in inflation-beating investment instruments. – [email protected]