Consumers welcoming July with fuel hikes
The increase in economic activity and easing of Covid-19 related restrictions have contributed to rising demand for fuel in developed countries.
PHILLEPUS UUSIKU
Consumers will have to pay more for the same quantity for both petrol and diesel. This comes after the Ministry of Mines and Energy announced that fuel prices will increase by 40 cents per litre. This adjustment is effective 7 July 2021.
The transport category in the consumer price index (CPI) of the Namibia Statistics Agency (NSA) carries the third largest weight of 14.28. This implies that on average, for every N$100 that consumers have in the wallets, N$14.28 is likely to be spend to transport.
Transport inflation stood at 7.3% in May this year, an increase of 7.4% when compared to a deflation of 0.1% in May last year.
According to the ministry’s spokesperson, Andreas Simon, amid all the oil market uncertainties, the exchange rate has recorded yet another appreciation of the Namibian dollar (N$) against the United States dollar (USD) at roughly N$13.80 per USD during the month of June 2021 versus the average exchange rate for May 2021 at N$ 14.04 per USD.
A currency appreciation usually reduces the under-recovery level and increases the over-recovery level in the final Basic Fuel Price (BFP) calculations. During June 2021, the per barrel prices of petrol and diesel across the international product market have sharply increased from about USD 76.68 to about USD79.75 and from about USD73.1 4 to USD77.67, respectively, he pointed out.
An increase in international barrel prices usually increases the under-recovery level and reduces the over-recovery level in the final BFP calculations. When taken into full mathematical consideration, the exchange rate appreciation was strongly outweighed by the increase in barrel prices, resulting in under recoveries on the current level of the BFP for petrol and diesel, Simon added.
Outlook
Oil production discipline among the Organization of the Petroleum Exporting Countries (OPEC) members and other major oil producers on the supply side coupled with a positive outlook on the demand side have ensured an upward trajectory in the prices of crude oil. A case in point is that the Russian Federation has been insisting on raising output further to avoid an increase in prices, but key OPEC producers, such as Saudi Arabia, have not yet given any clear signals on the next steps to be taken., he said.
There is also a growing consensus in the oil market that the movements in oil prices are more inclined towards the upside as the global economy recovers from the Covid-19 pandemic. Stricter global environmental regulations aimed at curbing carbon emissions are also putting more pressure on oil investors and pushing the oil prices upwards in the process, he added.
According to Simonis Storm (SS), the increase in economic activity and easing of Covid-19 related restrictions have contributed to rising demand for fuel in developed countries. Global inventories of brent crude oil continue to decline, though at a slower pace compared to the first four months of the year.
Consumers will have to pay more for the same quantity for both petrol and diesel. This comes after the Ministry of Mines and Energy announced that fuel prices will increase by 40 cents per litre. This adjustment is effective 7 July 2021.
The transport category in the consumer price index (CPI) of the Namibia Statistics Agency (NSA) carries the third largest weight of 14.28. This implies that on average, for every N$100 that consumers have in the wallets, N$14.28 is likely to be spend to transport.
Transport inflation stood at 7.3% in May this year, an increase of 7.4% when compared to a deflation of 0.1% in May last year.
According to the ministry’s spokesperson, Andreas Simon, amid all the oil market uncertainties, the exchange rate has recorded yet another appreciation of the Namibian dollar (N$) against the United States dollar (USD) at roughly N$13.80 per USD during the month of June 2021 versus the average exchange rate for May 2021 at N$ 14.04 per USD.
A currency appreciation usually reduces the under-recovery level and increases the over-recovery level in the final Basic Fuel Price (BFP) calculations. During June 2021, the per barrel prices of petrol and diesel across the international product market have sharply increased from about USD 76.68 to about USD79.75 and from about USD73.1 4 to USD77.67, respectively, he pointed out.
An increase in international barrel prices usually increases the under-recovery level and reduces the over-recovery level in the final BFP calculations. When taken into full mathematical consideration, the exchange rate appreciation was strongly outweighed by the increase in barrel prices, resulting in under recoveries on the current level of the BFP for petrol and diesel, Simon added.
Outlook
Oil production discipline among the Organization of the Petroleum Exporting Countries (OPEC) members and other major oil producers on the supply side coupled with a positive outlook on the demand side have ensured an upward trajectory in the prices of crude oil. A case in point is that the Russian Federation has been insisting on raising output further to avoid an increase in prices, but key OPEC producers, such as Saudi Arabia, have not yet given any clear signals on the next steps to be taken., he said.
There is also a growing consensus in the oil market that the movements in oil prices are more inclined towards the upside as the global economy recovers from the Covid-19 pandemic. Stricter global environmental regulations aimed at curbing carbon emissions are also putting more pressure on oil investors and pushing the oil prices upwards in the process, he added.
According to Simonis Storm (SS), the increase in economic activity and easing of Covid-19 related restrictions have contributed to rising demand for fuel in developed countries. Global inventories of brent crude oil continue to decline, though at a slower pace compared to the first four months of the year.
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