Fuel price brings relief to fishing, transport
The petrol price this month is still 3.7% than a year ago, while diesel is 12% more expensive.
The substantial fuel price decreases in the past two months, as well as stable prices this month will bring relief to not only motorists, but to all businesses and consumers at a time when the economy is still not gaining much momentum, the Economic Association of Namibia (EAN) says.
The fishing and transport sectors in particular will benefit as fuel accounts for about 29% and 24% respectively of total input costs, EAN research associate Klaus Schade says.
Schade reacted on mines and energy minister Tom Alweeno’s announcement last week that fuel prices will remain unchanged in February. Petrol will therefore still sell at N$12.47/l in Windhoek, while diesel 50ppm will cost N$13.56/l.
Transport inflation was the main driver of the inflation rate in 2018. The petrol price this month is still 3.7% than a year ago, while diesel is 12% more expensive, he says.
“After double-digit inflation rates for transport from September 2018 to December 2018, we can expect a return to single-digit transport inflation for January and February 2019, which will ease overall inflationary pressure,” Schade says.
Energy fund
According to him the National Energy Fund (NEF) incurred total under-recoveries of N$5.20/l for petrol and N$5.69/l for diesel between April and October last year. These under-recoveries were partly offset by price increases totalling N$2.35/l for petrol and N$2.85/l for diesel, leaving the NEF with a deficit of N$2.85/l for petrol and N$2.84/l for diesel, he says.
In contrast, the NEF recorded over-recoveries between November 2018 and January 2019. Over-recoveries mean the actual cost of fuel was lower than the pump price at service stations.
Schade says total over-recoveries amounted to N$3.47/l for petrol and N$2.82/l for diesel during the period. Of this, N$1.90/l for petrol and N$1.40/l for diesel was passed onto the consumer. This left the NEF with a surplus of N$1.57/l for petrol and N$1.42/l for diesel.
“Based on the under-recoveries and over-recoveries per litre, the NEF has still subsidised fuel by N$1.28/l for petrol and N$1.42/l for diesel. However, whether the NEF has incurred a net loss or gained a net surplus over the period April 2018 to January 2019 depends on the volume of fuel sold,” Schade says.
The fact that fuel prices will remain the same this month – despite over-recoveries in January – could indicate that the NEF incurred a loss which the ministry is trying to recover, he says.
Outlook
Looking ahead, Schade says the slowdown in the global economy suggest that the demand for oil will stay suppressed.
“Unless OPEC and Russia agree on substantial production cuts that cannot be compensated by production increases by non-OPEC member states, in particular shale oil producers in the US and Canada, the weak demand will prevent upward price pressure on oil. Despite output cuts agreed upon between OPEC (Saudi Arabia) and Russia in 2018, Russia reportedly produced a record output in 2018,” Schade says.
The Namibia dollar has held its ground against major currencies so far this year, he says. Some political risks could emanate from the national elections in South Africa in May 2019, he adds.
“If the South African rand/Namibia dollar can hold its current position, we might see some fluctuations in the fuel price, but not to the extent experienced in 2018,” Schade says.
The fishing and transport sectors in particular will benefit as fuel accounts for about 29% and 24% respectively of total input costs, EAN research associate Klaus Schade says.
Schade reacted on mines and energy minister Tom Alweeno’s announcement last week that fuel prices will remain unchanged in February. Petrol will therefore still sell at N$12.47/l in Windhoek, while diesel 50ppm will cost N$13.56/l.
Transport inflation was the main driver of the inflation rate in 2018. The petrol price this month is still 3.7% than a year ago, while diesel is 12% more expensive, he says.
“After double-digit inflation rates for transport from September 2018 to December 2018, we can expect a return to single-digit transport inflation for January and February 2019, which will ease overall inflationary pressure,” Schade says.
Energy fund
According to him the National Energy Fund (NEF) incurred total under-recoveries of N$5.20/l for petrol and N$5.69/l for diesel between April and October last year. These under-recoveries were partly offset by price increases totalling N$2.35/l for petrol and N$2.85/l for diesel, leaving the NEF with a deficit of N$2.85/l for petrol and N$2.84/l for diesel, he says.
In contrast, the NEF recorded over-recoveries between November 2018 and January 2019. Over-recoveries mean the actual cost of fuel was lower than the pump price at service stations.
Schade says total over-recoveries amounted to N$3.47/l for petrol and N$2.82/l for diesel during the period. Of this, N$1.90/l for petrol and N$1.40/l for diesel was passed onto the consumer. This left the NEF with a surplus of N$1.57/l for petrol and N$1.42/l for diesel.
“Based on the under-recoveries and over-recoveries per litre, the NEF has still subsidised fuel by N$1.28/l for petrol and N$1.42/l for diesel. However, whether the NEF has incurred a net loss or gained a net surplus over the period April 2018 to January 2019 depends on the volume of fuel sold,” Schade says.
The fact that fuel prices will remain the same this month – despite over-recoveries in January – could indicate that the NEF incurred a loss which the ministry is trying to recover, he says.
Outlook
Looking ahead, Schade says the slowdown in the global economy suggest that the demand for oil will stay suppressed.
“Unless OPEC and Russia agree on substantial production cuts that cannot be compensated by production increases by non-OPEC member states, in particular shale oil producers in the US and Canada, the weak demand will prevent upward price pressure on oil. Despite output cuts agreed upon between OPEC (Saudi Arabia) and Russia in 2018, Russia reportedly produced a record output in 2018,” Schade says.
The Namibia dollar has held its ground against major currencies so far this year, he says. Some political risks could emanate from the national elections in South Africa in May 2019, he adds.
“If the South African rand/Namibia dollar can hold its current position, we might see some fluctuations in the fuel price, but not to the extent experienced in 2018,” Schade says.
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