Namibia’s fuel price increase explained

A growing coal crisis in China and the recent hurricane that ravaged parts of the south eastern United States and the Gulf of Mexico are part of the catalysts that created the current global crude oil shortages, and subsequent fuel price hike in Namibia.

Like any country, Namibia is not immune against the ripple effect of changes in the global oil supply network, the Ministry of Mines and Energy stated recently explaining why fuel prices recently rose with 30 cents per litre. The increase took effect at one minute past midnight on Wednesday (6 October 2021).
Additional factors that added to the global crude oil shortages are a strengthening US Dollar, the OPEC-cartel’s struggle to recover its global crude oil shortages as the global economy recovers and requires more crude oil and the approaching European winter.
China: this second biggest economy on the planet is grappling with a shortage of coal to generate electricity. China’s main trade partner in coal, Australia, has stopped exports as part of a tit-for-tat trade war between these two nations. As coal supplies dwindle China will gobble up vast quantities of fuel to power her industries and businesses, and protect households against the Asian winter.
Hurricanes: The United States just for 2021 alone saw a record more than 18 tropical storms. Signs are it will continue for some time.
US Dollar: continued uncertainty in the global economy causes investors to hedge their investments in the US Dollar, as the prime global trade currency. An increase in the demand for the US-currency inevitably drives up its value, and reciprocally decreases the value of the Namibian Dollar.
US Dollar: A weak Namibian Dollar means it costs more to buy fuel on the international market, and to land it in Namibia.
OPEC plus: this oil producing and exporting cartel on date consists of 13 OPEC member countries and a further 10 major non-OPEC producers. OPEC increases its crude oil production or shrinks production to balance global supply and demand. The member countries convene periodically to decide on each member’s oil production output to balance supply and demand.
At the moment there is uncertainty as to what OPEC will decide. Importers of crude oil and fuel producers buy on these uncertainties, creating a shortage and subsequent price increase.
European winter: during winter European countries need to import vast quantities of certain fuels produced from crude oil for heating. That increases demand for fuel which spirals down on the international markets.
Namibia’s under-recovery situation prevailed during September. It cost 48,9 cents per litre more to import and bring petrol to the pump than what the consumer actually paid. Diesel cost 37,8 cent per litre more than what the consumer actually paid.
These under-recoveries were subsidised by the National Energy Fund. The price increase of 30 cents per litre will decrease the current pressure on the National Energy Fund, the Ministry of Mines and Energy explains in a statement.

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