MINES and energy minister Tom Alweendo last Friday announced that fuel prices will remain. The prices at Walvis Bay will be N$12,05 per litre for petrol and N$13,13 per litre for diesel for the month of March.
This is the third consecutive month that the ministry has kept fuel prices unchanged, with the minister saying in a statement the National Energy Fund will absorb the minimal over-recoveries.
Alweendo, however, said net importers of oil, including Namibia, are always at the receiving end of the global oil market, and therefore remain natural price-takers of whatever prices oil exporters set.
“That makes their respective local markets vulnerable to adverse fluctuations and shocks in the global oil market. Namibia is one of the net importers of refined oil, and although minimal, it could not fend herself off from the effects of increasing oil prices in February 2019, caused by the manifestation of oil supply politics by major oil producers under the Organisation of Petroleum Exporting Countries,” the minister said.
Since October 2018, oil prices started ticking up, making a big turn from a decreasing trend. This saw oil prices moving averages of US$58 and US$69 per barrel of refined petrol and diesel, respectively. January 2019 prices moved to averages of US$64 and US77 per barrel of refined petrol and diesel into February 2019.
The mines minister added that the exchange rate between the Namibia dollar and the US dollar strengthened during the period under review, but it was not enough to mitigate the adverse effects of increasing oil prices.
“The exchange rate moved from an average of N$14 in January to N$13,70 in February 2019. Filtered through the local market, gains recorded in January 2019 fell significantly by a margin of over 35c/l on petrol and over 60c/l on diesel. Over-recoveries per product on the basic fuel price import parity landed at Walvis Bay as at 25 February 2019 indicated a 25,953 c/l for petrol and 7,736 c/l for diesel,” Alweendo noted.
In terms of the strengthening rand, to which the Namibia dollar is pegged on a 1:1 basis, analysts The Namibian spoke to in February said it remains one of the most volatile currencies in the world, despite strengthening by a little over 7% during January 2019.
Research associate at the Economic Association of Namibia, Klaus Schade said the rand is recovering some ground lost during 2018. However, the current global climate is characterised by a number of uncertainties (trade wars, geopolitical factors, Brexit), which can lead to fluctuations in exchange rates.
“Unchanged fuel prices for February are one of the results of the strengthening of the Namibia dollar. In contrast, revenue for exports charged in US dollars and so forth will decline since exporters received only N$13,30 per US dollar on average in January, compared to N$13,87 per US dollar in December,” Schade explained.
Shelly Arnold, PSG Namibia’s research analyst said the rand is the most volatile currency on the world market, and a lot of its valuation depends on emerging market sentiments, not SA-specific factors, “which means a ‘perfect’ scenario is not really attainable.