Pricey fuel pays for storage facility
The new Strategic Oil Storage Levy which will be used for the construction of the new bulk fuel storage facility is an additional levy to the existing Namibia Petroleum Corporation and Fuel Marketing Levies introduced in April 2012 which contribute to the Namibia Energy Fund. The new oil storage levy will push up the price of fuel by at least N$0.40 per litre for petrol and N$0.50 for diesel.
This is according to a statement provided by the Ministry of Mines and Energy to the Economist upon request. The Storage Levy together with the Slate Fund at N$0.37 contributes a significant portion to the Namibia Energy Fund, with Marketing and NAMCOR levies contributing only N$0.02 and N$0.76 respectively.
Currently, the Namibia Energy Fund is worth approximately N$1.2 billion according the Ministry. Part of the reason why the fund exists is for the subsidization of fuel and electricity. “This figure is artificial however due to the fact that it can be wiped out in the event of a huge under-recovery. Similarly, the figure may balloon in the event of continuous months of over-recovery,” the ministry stated.
When the Economist asked Deputy Director for Petroleum Affairs, Immanuel Nghishoongele about the potential impact under-recoveries would have on the ministry’s ability to subsidise fuel and electricity, he said, “there is no danger to the Namibia Energy Fund. It is a dedicated levy on the price of fuel.” Under-recoveries occur when the international fuel prices are higher than national pump prices.
“The Namibia Energy Fund is actively pursuing its mandate. This implies that, any under-recovery that may arise will be taken care of. Furthermore, the subsidisation of transporting fuel to rural and far outlying areas from the last rail head will continue to be paid to the transporters in order to ensure the equalisation of fuel prices country wide.”
“Overall, the fund is in a good state, any diagnostic will give it a clean bill of health” the ministry’s statement read.