Expect another fuel price increase soon

PHILLEPUS UUSIKULast week, the Ministry of Mines and Energy announced the seventh (7th) fuel price increase for 2021. On 03 November 2021, the price of petrol will increase by 50 cents per litre, while the price of diesel will go up by 50 cents per litre. The transport category, which captures fuel, was the main driver of inflation in September 2021, contributing about 30%, according to the Namibia Statistics Agency (NSA). The category carries the third largest weight of about 14.28 in the NSA consumer basket after housing, water, electricity, gas and other fuels (28.36) and food and non-alcoholic beverages (16.45). On average, for every N$100 that consumers have in their pocket, N$14.28 is likely to be spent on transport.According to the ministry’s spokesperson, Andreas Simon, shortages of natural gas and coal from Asia to Europe are driving additional demand for oil products in power generation while supply has remained tight. The Ministry has observed that the benchmark Brent crude oil peaked at US$86.04, the highest price since October 2018. RAW MATERIALThese significant increases in the prices of crude oil, which is the raw material from which petrol and diesel are extracted through a refining process, will automatically be reflected in the prices of the refined commodities. Therefore, during October 2021, the per barrel prices of petrol and diesel across the international product market have increased significantly by US$10 to US$12 from about US$85.87 to about US$95.23 and from about US$81 .1 90 to US$93.60, respectively, Simon said.In the currency exchange market, the Namibian dollar (N$) recorded a slight depreciation against the USD at roughly N$14.8136 per US$ during the month of October 2021 versus the average exchange rate for September 2021 at N$14.5826 per US$. A local currency depreciation usually has the negative effect of increasing the under-recovery level and decreasing the over-recovery level in the final Basic Fuel Price (BFP) calculations. According to Simonis Storm, “given our weak currency and higher global oil price expectations, we do foresee at least one more fuel price hike by the MME before the end of the year.”

Expect another fuel price increase soon

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Expect another fuel price increase soon

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