The Ministry of Mines and Energy’s announcement this week that fuel prices remain unchanged for the month of May has good economic reasoning behind it.
In a statement the ministry said the demand for oil on the global market plummeted in recent days, as new waves of Covid-19 lockdowns took effect in India and Japan, respectively the third and fourth largest oil consumers after the United States and China. Lockdowns means less economic activities and therefore a reduced demand for fuel like petrol, diesel and aviation fuel.
With the global demand for crude oil dwindling, fuel producers could get their hands on cheaper crude oil and produce fuels at lower prices.
Simultaneously, the Namibian Dollar also gained strength against the US Dollar during March. It strengthened from N$14,9 per US Dollar to N$14,4 per US Dollar. That directly translates to cheaper fuel prices which is traditionally traded in the US Dollar as the main global trade currency.
In the statement the Ministry further confirmed there remains an under-recovery of 38 cents per liter on petrol, but that this value is offset by a 14 cents per liter over-recovery on diesel and that the National Energy Fund can still absorb this difference.
With fuel prices remaining unchanged, the pump prices in Walvis Bay remains at N$13,15 per liter for petrol and N$13,18 for diesel. The Ministry warned though that the international fuel market remains unpredictable and volatile and that the situation could change for the worse towards June.