Marginal fuel price decrease

Brian Benza
Staff Writer | Tuesday August 10, 2010 00:00

In a statement, the Ministry of Minerals, Energy, and Water Resources said that effective yesterday, both unleaded and lead replacement petrol pump prices decreased by 13 thebe per litre while diesel went down by 25 thebe.

The reduction will see petrol prices going down to P6.05 in and around Gaborone while the price of diesel will soften to P6.30.

The price of illuminating paraffin was also cut down by 37 thebe per litre. While normally, the government with a lag period of between 30 to 60 days, has been moving local fuel pump prices in line with international crude oil prices, the latest reduction comes at a time when oil prices are actually firming, confirming the previous hikes were too heavy.

In May the government announced record fuel price increases with petrol shooting by 78 thebe from P5.40 to P6.18. Diesel shot up by 63 thebe from P5.92 to P6.55. However, yesterday's decrease in fuel prices comes at a time when crude oil prices actually firmed by 0.65 percent averaging US$75.25 a barrel during July compared to $74.76 a barrel in June 2010.

'The increase effected three months ago were a bit heavy as the objective was to boost up the National Petroleum Fund as it was being depleted.  Before the May adjustment, we had last increased pump prices in August last year hence we were under recovering,' said deputy Director of the Department of Energy Affairs, Kenneth Kerekang. 

The National Petroleum Fund from which government pays petroleum retailers the difference between the administered and prevailing fuel prices had come under pressure from rising crude oil prices. The fund is supported by a levy on the pump price of fuel.

'In May, we owed oil companies in Botswana about P100 million but we have since managed to reduce that to about P14 million. This is why we have reduced prices to relieve consumers. If the situation remains the same, we are likely to have another decrease soon,' said Kerekang.

An oil industry source said that in Botswana, there is an over reliance on the National Petroleum Fund, a situation that is not always ideal. 'I reckon the cumulative slate position has been in over-recovery that is why pump prices have been reduced when international oil prices have been actually firming. The over- recovery means the  pump prices charged were more than the actual costs of bringing the fuel here. The levies were over and above the margins for the retailers,' said the source. The pump price cut, though minimal will to some extent release pressure off consumers who have been squeezed by the recent hikes in VAT and electricity tariffs and the heavy fuel prices from April. However, commuters are unlikely to benefit from the pump price as commuter fares are not expected to be reviewed.  The fuel price cut comes at a time when secretary general of Bus Operators Association, Gago Tlhaselo, confirmed that they are meeting Transport Minister, Frank Ramsden this week to request an increase in fares.

He cited the recent increase of VAT as well as increase in fuel prices as some of the reasons for demanding the fare hike.