The mines and energy ministry has resolved to decrease the price of diesel to N$19,05 per litre for the ppm50, and N$19,25 per litre for ppm10, while petrol is unchanged at N$19,78 per litre for June.
These are the applicable prices at Walvis Bay, where fuel is offloaded, and will be adjusted countrywide.
The announcement yesterday also comes with an approval of a further 30 cents a litre to increase the road user charges for road maintenance and the construction of new roads.
This increase will now have the road user charge increasing from N$1,48 cents per litre to N$1,78 cents per litre effective 7 June, and has already factored in the new pump prices.
According to the ministry, the prices of oil are experiencing significant short-term declines due to ongoing demand concerns caused mainly by the rampant strengthening of the United States (US) dollar.
It is further anticipated that the oil price will continue to fall as the Organisation of the Petroleum Exporting Countries (Opec) is not expected to cut its overall output further in its next meeting on 4 June.
Although it seems that the Russian Federation does not expect any new major developments from Opec+ at its upcoming meeting, Saudi Arabia has hinted at the possibility of another round of production cuts at the meeting to try and aid rising oil prices.
However, oil prices could rebound if Opec+ was to introduce significant oil production cuts, coupled with a more resilient-than-expected US economy, unless demand elsewhere absolutely collapses (akin to a Covid-like lockdown), or the market is hit with non-compliance from big Opec+ producers.
“The latest calculations by the ministry indicate that the average price for unleaded petrol 95 over May is at USD92,118 per barrel (compared to US$102,374 per barrel at the end of April), depicting a significant decrease of about US$10 over the review period,” said the ministry.
Additionally, the ministry said the average price for diesel 50ppm over May is at US$85,765 per barrel (compared to US$96,514 per barrel at the end of April), a decrease of about US$10 per barrel over the review period.
Moreover, the average price for diesel 10pm over May is at US$87,300 per barrel (compared to US$97,414 per barrel at the end of April), a decrease of about US$10 per barrel over the review period.
On exchange rates, the rate figures for the period of 1-26 May indicate that the Namibia dollar has depreciated against the US dollar at N$18,9242 compared to N$18,1625 at the end of April.
“Therefore, after entering the above input factors into the fuel pricing model, the ministry recorded over-recoveries on petrol and both diesel products, that is an over-recovery of 4 cents per litre on petrol and over-recoveries of N$1,36 and N$1,18 cents per litre on diesel 50pm and 10pm, respectively,” said the ministry.
For reasons mentioned above, it was announced that petrol prices will remain unchanged while the prices of diesel 50 pm will decrease by 80 cents per litre and those of diesel 10 pm will decrease by 60 cents per litre.
The petrol prices at Walvis Bay will thus remain N$19,78 per litre while the prices of diesel 50 ppm will become N$19,05 per litre while those of diesel 10 ppm will become N$19,25 per litre.
The decision is inclusive of all the adjustments listed above. In other words, although the road user charges are increasing by 30 cents per litre, the ministry has made an equal adjustment in the opposite direction to the petrol basic price to keep the petrol prices unchanged.
The effective date for all these adjustments is Tuesday, 6 June at midnight.
Email: bottomline@namibian.com.na
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