A relatively strong exchange rate and a sharp increase in freight rates will see local fuel prices of petrol and diesel increase by 20 cents a litre at 00h01 next Wednesday.
“The BFP (Basic Fuel Price) unit rate slate for May 2015 recorded lower unit rate under-recoveries for all the fuel products in comparison to the figures recorded for the previous month,” said Minister of Mines and Energy Obeth Kandjoze in a statement released on Friday.
Kandjoze explained that in April 2015 the average exchange rate was N$12.03 for every US dollar in comparison to N$11.9341 last month for a single US dollar. This, he said, explains the improvement in the unit rate under-recoveries. However, he noted that the BFP failed to record any unit rate over-recoveries for any fuel product due to a sharp increase of US$12.70 in the average freight rates since the last fuel price review last month.
“Despite the fact that Namibian fuel pump prices continue to be pushed upwards by a strong exchange rate and other escalating import-related cost components such as freight rates, the prices of crude oil throughout global markets continue to fall due to a continuous oversupply of the product. This is where the international fuel market needs to strike a balance to stabilise pump prices,” remarked Kandjoze.
The minister added that interestingly, Iraq is taking OPEC’s strategy to defend its share of the global oil market to a new level. “The nation plans to boost crude exports by about 26 percent to a record 3.75 million barrels a day next month, according to shipping programmes, signalling an escalation of OPEC strategy to undercut US shale drillers in the current market rout. The additional Iraqi oil is equal to about 800 000 barrels a day, or more than what comes from OPEC member Qatar,” said Kandjoze.
He concluded that the rest of the Organisation of Petroleum Exporting Countries are expected to rubber stamp its policy to maintain output levels. “For the consumer, the future looks bright in terms of lower oil prices due to oversupply,” said Kandjoze.