More nasty fuel price shocks in store
Innocent Selatlhwa | Friday November 16, 2018 13:27
And the Botswana Energy Regulatory Authority (BERA) had recommended an across the board increment of P1.20 litre, after its monthly assessment of fuel prices and associated costs for local oil companies. Both the actual import prices and BERA recommendations are far higher than the average 35 thebe adjustment the Ministry of Mineral Resources, Green Technology and Energy unveiled on Wednesday and industry experts warned government would not be able to keep a leash on fuel prices.
“Government should have adjusted the prices closer to the levels oil companies are incurring, but such a shock increase would have caused a public revolt,” a senior executive with a local oil company told Mmegi yesterday evening. “We are going into the farming season and diesel is amongst the major inputs. One of government’s considerations could have been to lessen the impact on Batswana.
“They are trying to stagger the increases, but this is not sustainable.” This week, industry experts estimated that government collectively owed oil companies more than P1 billion in payments meant to cover the difference between the actual cost of bringing fuel into the country, and the pump prices set by government.
The National Petroleum Fund (NPF) which collects levies and makes payments to the oil companies, is running threadbare. Government had made a P430 million payment to the oil companies in May by diverting funds from the Road Levy Collection Fund.
“That payment cleared the arrears for the companies up to November, but the arrears that have grown from December till now, amounting to more than P1 billion, have not been touched.
“The situation puts oil companies in distress, as it eats into their operating capital,” another industry insider said.
BERA commercial manager petroleum Batsumi Rankokwane told Mmegi that the regulator was pushing for prices to be adjusted monthly, in order to keep track of the fluidity of crude oil prices. Monthly adjustments would, over time, reduce the occurrence of shock increases and plug the arrears. “Since 1986 monthly reviews have been done but we have not been adjusting immediately like other countries, such as South Africa and Tanzania.
“The nature of fuel prices is such that they are not constant and adjustments need to be done monthly,” he said.
Rankokwane said although prices had increased on October 15 and also November 15, this was not an indication that monthly adjustments had begun. “It is not a given that an adjustment will be made again in a month’s time,” he said. He also dismissed perceptions that the pump prices increases were due to the ongoing high profile money laundering case in which P230 million was diverted from the NPF.
“Yes Batswana can talk about the NPF, but they also need to understand that the NPF is put under pressure by the amount of responsibilities it has.
“Mostly they know it to be used for cushioning fuel prices, but there is more to that. “The Fund is used for building government storage facilities such as the Tshele Hills which cost billions.
“The Fund is also used to buy strategic fuel stock which are used for essential services when the country runs dry.
“These are then also insured, which also comes at a cost.“The pressure from competing demands leaves price adjustments as the only option.”