The Ministry of Mines and Energy has announced significant increases in dealer margins in a move aimed at stabilising the fuel supply chain and addressing the challenges faced by oil wholesalers and service station operators.
The decision comes as a response to under-recoveries recorded in the fuel industry, which have compelled the government to raise fuel prices to cover costs.
Ministry of Mines and Energy Senior Public Relations Officer Andreas Simon said the Ministry resolved to increase the industry margin for oil wholesalers by 18 cents to N$1.46 cents from N$1.28 cents per litre.
The Ministry also resolved to increase the dealer margin for service station operators by 20 cents from N$1.63 to N$1.83 cents per litre.
Furthermore, in an effort to provide temporary relief to struggling oil wholesalers, Simon added, “the Ministry further resolved to offer a temporary 3-month relief margin of 20 cents per litre to the oil wholesalers to try and rescue them from dire straits which their businesses are facing.”
The adjustments are set to take effect on 4 October 2023.
The development comes as the Fuel and Franchise Association of Namibia (FAFA) last year complained to the Ministry that its members were operating at a low 5% gross profit, proceeds of which they mainly use to service salaries, bank charges, rental and other operational costs.
Shortly after the association cancelled a nationwide strike after it presented an array of demands to the Ministry, among them calls to address the issue of dealer margin, which the government acceded to and adjusted by 50 cents, shifting from 113 cents to 163 cents, from an initial demand of N$1.77.
The Ministry emphasised the necessity of these changes to align fuel prices with market dynamics and ensure the efficient security of supply in the country.
As a result of substantial under-recoveries, the Ministry also announced an increase of N$1.90 for petrol and N$2.40 for diesel for the month of October, effective from Wednesday, 4 October, 2023.
Consequently, in Walvis Bay, the price for petrol will be N$22.88 per litre. Diesel 50 ppm will be priced at N$23.15 per litre, while diesel 10ppm will be pegged at N$23.35 per litre.
To offset the under-recoveries observed in September 2023 on behalf of fuel consumers, the National Energy Fund will absorb the full cost through the fuel equalisation levy.
However, the Ministry stressed that Namibia’s fuel prices are subject to international oil market prices, and they do not have the ability to influence them.
“The Ministry would like to emphasise that Namibia is subject to international oil market prices and is not able to influence them. Disruptions stemming from natural disasters, such as the devastating floods in Libya, have a notable impact on fuel prices,” said Simon.
This comes as the average price of unleaded petrol 95 for September 2023 increased to US$114.316 per barrel, marking a 3.4% rise compared to the end of August 2023.
Similarly, diesel 50ppm and diesel 10ppm saw notable increases of about US$6 per barrel each, equating to 5.5% and 5.3% increases, respectively.
