27 Jul 2005
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By Wezi Tjaronda
BARELY two months after fuel prices went up by 48 cents per litre, Namibians should yet again brace themselves for another fuel hike, which takes effect middle of next week.
This time, pump prices for leaded, unleaded petrol and diesel will go up by almost 40 cents per litre, which will make consumers fork out close to N$5 for a litre of petrol.
Retail pump prices at Walvis Bay will go up to N$4.77 per litre for leaded petrol, N$4.79 per litre for unleaded petrol and N$4.54 for a litre of diesel. Since April 27, consumers in Walvis Bay have been paying N$4.38 for leaded petrol, N$4.40 for unleaded fuel and N$4.16 for diesel.
The Ministry of Mines and Energy announced yesterday that the fuel pump retail prices for petrol would increase by 39 cents per litre, while the wholesale price for diesel would increase by 38 cents per litre as of the early hours of Wednesday, August 3.
Minister Erkki Nghimtina said in a press release yesterday the revision of the Namibian fuel pump price is to compensate for the fluctuations in the import parity price and the depreciation of the Namibian currency against the US dollar since the crude oil transactions are valuated in the US currency.
Currently, said the minister, pump prices range between 37 cents per litre, 39 cents per litre and 96.8 cents per litre below the import parity price for leaded petrol, unleaded petrol and diesel respectively as at the end of June and it appears that the historical relationship between the oil prices and stock cover has not changed.
At the moment, higher oil prices than in the past and relatively low commercial oil inventories and a lack of spare oils production are being experienced.
Additionally, Nghimtina noted that the Organisation of Petroleum Exporting Countries (OPEC) is also concerned about the availability of oil during the coming winter in the Northern Hemisphere, which has led to a situation where the import parity cost resulted in a cumulative under recovery on the local market prices.
As much as the ministry tries to keep fuel prices at an absolute minimum, to reflect positively on commodity prices transported from abroad, Nghimtina noted that high oil prices, low commercial inventories together with increasing costs of crude oil prices have left the ministry with no option but to increase fuel prices to balance the under recovery currently prevailing on the market.
The import parity price element, he explained, together with N$/US$ exchange rate determines the magnitude of the fuel price adjustment at any given time, which increases the real price of fuel in the country and as a result, an under recovery situation is likely to be reflected, as in the case with all petrol grades and diesel at present.
The ministry said when it increased fuel prices in April, crude oil prices had again been increasing and had settled above US$50 (N$300) per barrel.
In addition to high demand growth, which fuelled the sustained rise in fuel prices observed over the period and early indications of further strong economic growth in 2005, suggest that this trend is set to continue, said the ministry at the time.
This growth however comes from Asia, where government subsidies on oil products in a number of countries give an artificial impetus to demand growth.
"As high oil prices boost these subsidies and hit economic growth, some of these influences on demand may lessen and a noticeable drop in demand could be seen as early as the second half of 2005," said the ministry then.
It is highly likely that the new increases will kick-start fresh increases in the price of goods and services as well as transport costs.