Price monster guzzles fuel
18 May 2021 | Economics
Andreas Simon; Senior PRO: Mines and Energy; "The international oil market is a very volatile environment, and oil prices can swing in any direction at any given moment."
Rising fuel prices since the beginning of the year have taken its toll on annual transport inflation, which jumped from 2.4% in March to 7.5% last month.
A year ago, transport inflation was -0.1%.
The spike in transport inflation – one of the heavyweights in the Namibian consumer basket – was one of the main drivers of overall inflation increasing from 3.1% in March to 3.9% in April.
“This is the highest annual inflation rate recorded since June 2019,” the Namibia Statistics Agency (NSA) said in its latest data release. In April 2020, the rate was 1.6%.
Fuel prices in Namibia have surged by N$1.80 a litre in total so far in 2021. In April 2020, a litre of 95 octane unleaded petrol at Walvis Bay cost N$11.35. The current price is N$13.15/l. Diesel 50ppm’s price increased from N$12.13/l to N$13.18/l.
Fuel prices in the Namibia Consumer Price Index (NCPI) is included in the subcategory “operation of personal transport equipment” in the overall transport category.
The subcategory was in deflation from April 2020 until March 2021, when it recorded a positive rate of 0.9% on an annual basis. Last month’s rate of 8.1% is the highest since December 2018, when it was 10.5%.
Transport carries the fourth biggest weight in the national consumer basket. Out of every N$100, the average consumer spends N$14.28 on transport.
The ministry of mines and energy left fuel prices in Namibia unchanged in May despite an under-recovery of 38c/l on petrol. An over-recovery of 14c/l on diesel was recorded.
“The international oil market is a very volatile environment, and oil prices can swing in any direction at any given moment,” the ministry’s senior public relations officer, Andreas Simon, said in a statement at the end of April.
“The ministry will, however, continue to monitor the global oil market developments and take the best possible decisions to safeguard the interest of Namibian fuel consumers,” Simon added.
Oil prices rose on Friday, reversing some of the previous day's sharp losses as stock markets strengthened and the US dollar slipped, though gains were capped by the coronavirus situation in major oil consumer India.
Brent crude closed at US$68.71/llb, up 2.48% from Thursday.
Colonial Pipeline said late on Thursday it had restarted its entire pipeline system and had begun deliveries in all its markets. The line is the major conduit from Gulf refineries to the US East Coast.
"Oil is rallying because supply is moving again, whether it is through the pipeline or the Mississippi river," said Phil Flynn, senior analyst at Price Futures Group in Chicago. "Tempering the excitement is ongoing concern about Covid cases in India."
Oil prices have come under pressure this week from surging coronavirus cases in India as well as worries that the highly transmissible variant first detected there is spreading to other countries.
"[Brent's] renewed failure to exceed US$70 is likely to have sparked selling by speculative market participants, especially as operation of the Colonial Pipeline is being ramped up again in the US," Commerzbank said. – Additional reporting by Nampa/Reuters