By:Justicia Shipena
The cutting of oil production by oil producers led by Saudi Arabia could come as a curse for fuel consumers in Namibia, as the Mines and Energy Ministry says it could spike prices.
This week, major oil producing countries led by Saudi Arabia announced a surprise production cut from May of more than one million barrels per day.
Cuts by Saudi Arabia, Iraq, Kuwait, Algeria, Oman and the United Arab Emirates from May to the end of the year will be the biggest reduction since the OPEC+ cartel slashed two million barrels per day in October last year.
Mines and Energy Ministry’s Petroleum Economist Abednego Ekandjo told The Villager that this cut might not affect volumes of oil to Namibia.
“It will not affect the volumein itself, but it will affect the price as it creates a scarcity problem,” he said.
“And a scarcity problem pushes the prices up but the volumes will still be available, only that it will be available at a much higher price.”
According to the Namibia Statistics Agency (NSA),the country’s N$10 billion import bill in January 2023 was mainly driven by petroleum oils sourced from Saudi Arabia, Malaysia and Singapore.
On Monday the Ministry announced that both petrol and diesel prices will remain unchanged effective from 5 April 2023.
“The petrol prices in Walvis Bay will remain N$19.78 per litre and the prices of both diesel products will remain N$20.65 per litre,” said Andreas Simon, the Ministry’s Senior Public Relations Officer .
Earlier in March, Brent crude oil prices fell below U$72 per barrel amid ongoing instability in global financial markets.
Simon said oil prices have come under pressure from a crisis in the international banking sector which, he said, has the potential to hurt global economic growth and reduce global fuel demand, forcing oil prices to fall as oil suppliers are expected to compete amid the limited demand.
“The drop in the oil price will more likely turn out to be temporary because it is not underpinned by supply-demand fundamentals surrounding the physical commodity, although the need remains to monitor the potential effect on central bank interest rate decisions and inflation,” he said.
The latest calculations by the Ministry indicate that the average price for unleaded petrol 95 over March 2023 is at U$99.292 per barrel.
The Ministry said this is a slight decrease of a few cents over the review period.
“Additionally, the average price for diesel 50ppm over March 2023 is at U$101.817 per barrel, a decrease of about U$6 per barrel over the review period.”
At the same time, the Ministry said it is also adding diesel 10ppm to the list of price-controlled petroleum products, which is currently trading at an average of U$102.807 over the period under review.
Simon added that recent trade-flows of petroleum products from the international oil market to Namibia have shown that there are two diesel types landing in Namibia, namely gasoil diesel 50pm and ultra-low sulphur diesel 10pm.
He added that the Ministry has requested the oil industry to ensure that fuel consumers are sold the right products under the correct branding at all retail service stations.
“In other words, the selling of ultra-low sulphur diesel 10pm under the branding of diesel 50pm needs to be corrected,” he said.
At the back of it the Ministry introduced a new model for calculating the basic fuel price for controlled petroleum products.
Andreas said oil industry stakeholders were consulted and the new model was approved by Mines and Energy Minister Tom Alweendo.
This new model comes into effect this month.
“The oil industry was duly consulted throughout the review process and the new model was approved by the minister for implementation with effect from the is of April 2023,” Andreas said.