Fuel prices could rise again by P1.00

Higher and higher: Pressure is building on fuel prices
Higher and higher: Pressure is building on fuel prices

The local economy could soon be hit with a one pula increase in fuel pump prices, the third increase of the year and one which would follow the P1 across the board rise effected on March 31.

This week, Botswana Energy Regulatory Authority (BERA) revealed that the local oil sector was currently in a state of under-recovery, where the price paid at the pump is lower than the price paid across borders as well as the costs involved in importing the fuel.

According to statistics shared by BERA, the under-recovery across the different fuels in the country currently ranges from 77 thebe per litre to P1.10. Illuminating paraffin is currently being sold at a P1.58 discount per litre.

Pump prices rose on February 28 by between 52 and 58 thebe, before jumping again on March 31 by one pula across the board in response to the introduction of the higher fuel levy. The energy regulator said the February 28 price increase was due to rising international crude oil prices, but this week added that the previously stated plans to adjust pump prices on a monthly basis would not be presently possible. “The monthly adjustment of pump prices is a challenge as BERA recommends to the minister for adjustment as per the BERA Act.

“The decision to adjust pump prices is taken at a high level and sometimes there are delays which may make it difficult to do it on a monthly basis.

“The fact of the matter is that adjustments are made as and when international oil prices change,” the authority said in emailed responses to BusinessWeek.

While the National Petroleum Fund (NPF) is supposed to provide a buffer against deep fuel price increases, the Fund has been depleted due to years of under-recovery dating back to 2018, as well as a highly-publicised saga involving the diversion of P250 million from the Fund. In each litre of fuel sold at the pumps, 13.5 thebe is remitted to the NPF to subsidise oil companies for the difference between the costs they incur in importing fuel and the actual pump prices.

Analysts, however, told BusinessWeek the trend in global crude prices suggested BERA may not have to immediately raise fuel prices to the level indicated by the under-recovery. Crude oil prices in recent months have been driven by optimism around the global economy due to higher COVID-19 vaccination rates.

“The escalating cases in India, however, and other concerns around vaccination in Europe and South America is dampening that optimism to some extent,” an industry analyst told BusinessWeek.

“In addition, the oil producers have committed to upping their production, while the US, which is the biggest consumer of oil, has indicated that it has higher inventories of the commodity.”

Should pump prices rise to erase the under-recovery, the increase will be yet another shock to the economy and consumers who are struggling with higher VAT, a new sugar tax and a wave of greater administered prices.

Editor's Comment
Where Are The Vaccines?

The government has without a doubt come up with good initiatives such as partnering with private medical practitioners in the vaccine roll-out. This was indeed a welcome development that reduced congestions at government vaccination centres.Well, unfortunately, the celebrations were short-lived. People flocked to the vaccination centres in large numbers and most of the private clinics are currently left with no vaccines and unending telephone...

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