Mines and energy minister Tom Alweendo in a statement on Friday said the global transport network currently has been disrupted and has come to a standstill due to the Covid-19 pandemic and as a result, demand for oil around the world is significantly depressed against a huge supply of oil in storage, which the world does not need right now.
“This imbalance between demand and supply led to the collapse of global oil prices, much worse in the US where the futures for one of the oil price benchmarks, Western Texas Intermediate, went below zero for the first time in history,” Alweendo noted.
He stated that Brent Crude oil, Namibia’s price benchmark, has not been spared as it culminated into sharp falls in refined oil prices from monthly averages of US$35 and US$43 per barrel for petrol and diesel respectively in March. The decrease continued to an average of US$22 and US$29 per barrel of petrol and diesel respectively in April.
The fall in the oil price was accompanied by a sharp depreciation in the exchange rate between the Namibia dollar and the US dollar, which potentially could have offset the benefits of a decline in oil prices. However, the impact of the fall in oil prices was larger than the depreciation in the local currency.
The Namibia dollar depreciated from an average of N$16,60 per US dollar in March to a monthly average of N$19 in April.
Filtered through the local market, both petrol and diesel recorded huge over-recoveries.
Alweendo said like all other sectors of the economy, the local oil industry – both bulk importers and fuel retailers – is negatively affected by the national lockdown to curb the spread of Covid-19.
“Local demand for fuel has dropped significantly to a point where bulk fuel importers are only selling a fraction of what they used to sell and some retailers’ sales are close to nothing depending on their location,” Alweendo said.
The decrease in fuel prices takes effect on 6 May.