Namibia feels the pinch of lower oil prices – IPPR

Deflationary pressure... Declining transport inflation, which accounts for 15 percent of overall inflation, is mostly benefitting fuel-intensive businesses, such as fisheries, mining and transport, as well as individual motorists. Yet, lower income groups have not really benefitted from lower transport inflation.


Government should not subsidise fuel prices, but should rather promote the more efficient use of fuel, as subsidising fuel uses unnecessary financial resources.

This is according to Klaus Schade, the executive director of the Economic Association of Namibia and a research associate of the Institute of Public Policy Research (IPPR).

“With the constant increase in dealer margins and fuel levies in Namibia, local consumers have not benefitted from lower global oil prices,” said Schade.

He also noted that falling transport inflation – which accounts for 15 percent of overall inflation – is mostly felt by fuel intensive businesses, such as fisheries, mining and transport as well as individual motorists.

According to Schade lower income groups have not really benefitted from lower transport inflation. Schade made these comments yesterday during an Economy Watch presentation, themed: ‘The two sides of the low oil price’.

The seasoned economist pointed out that mostly due to lower global oil prices Namibia’s exports to Angola declined from N$4.1 billion in 2014 to N$2.6 billion on 2015.

In fact, in 2015 Angola was ranked fifth on Namibia’s list of top export destinations and now the northern neighbour does not even feature in the top 10 positions on that list.

“Even Air Namibia is considering closing their Angolan route, which used to be their most profitable route by far,” Schade observed.
Other Namibian sectors that have suffered tremendously because of lower oil prices include mining exploration, financial services (most money changers), as well as health and education, which are seeing less uptake from the normally cash-flushed Angolan visitors.

“The challenges of low oil prices (for Namibia) far outweigh the benefits, as it directly impacts Namibia’s economic growth and its Gross Domestic Product (GDP).

Currently, the main global oil producers are Saudi Arabia who recently overtook Russia.
Between 2009 and 2015 the United States of America’s (USA) oil production increased by about 80 percent. However, in Africa, due to numerous supply-side disruptions, oil production has actually dropped and the continent now accounts for only 10 percent of global production.

Meanwhile, global demand for oil is led by the Asia Pacific region (30 percent), where a number of industrialised economies are situated.

This is followed closely by North America that accounts for 25 percent of global demand. In fact, the USA currently consumes almost double the amount of oil used by China.

“African oil consumption has increased slightly, but is still below the global average,” said Schade. Globally, he noted, demand for oil has increased by approximately 10 percent in the last seven years.


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