- Gov’t under-recoveries owed to fuel companies
- Lower global fuel prices helped resurrect NPF
- Decline in fuel prices to reduce over-recoveries
As a result of over-recoveries by fuel companies made possible by declining global crude oil prices, government has accumulated funds in excess of P268 million into the previously drained National Petroleum Fund (NPF), The Botswana Gazette has established.
Accordingly, the Botswana Energy Regulatory Authority (BERA) has announced that retail pump prices of unleaded petrol 93, unleaded petrol 95, diesel 500ppm, diesel 50ppm and illuminating paraffin have been reduced by 159 thebe (17.2 percent), 163 thebe (17.4 percent), 141 thebe (15.1percent), 140 thebe (14.9 percent) and 188 thebe (23.6 percent) respectively. The price reduction became effective on 13 June 20.
The Permanent Secretary for the Ministry of Minerals, Green Technology and Energy Resources, Mmetla Masire, says retail pump prices were reduced due to high over-recoveries recorded since the last fuel price adjustment in April 2020. Despite international oil prices recovering as a result of easing lockdowns globally, the cumulative slate over-recovery has been high and there was a need to manage unit rates and align retail pump prices to the region, Masire explained.
Before the recent re-adjustment, fuel companies over-recovered at around P2.30 thebe every month per litre sold. This meant that the money was collected and paid into the NPF. Further, government collects 13.5 thebe as NPF levy per litre sold.
Botswana consumes around 120 million litres of fuel every month, according to data from BERA.
According to the BERA May 2020 Unit Rate Slate seen by The Botswana Gazette, the import parity price was at P3.78 per litre. Import Parity Price (IPP) is the price of an imported product when landing at the border, which includes international transport costs and tariffs.
Government then set the recommended fuel price at a minimum of P8.50 per litre. However, there are levies added into the cost per litre at pump prices, which would then hike the total cost of fuel at pump fillings stations to around P9.27 per litre. Since government has set February prices at P8.27, it means filling stations over-recovered by P2.30 in May alone.
This means that over P276 million was made as over-recoveries in May alone. There is a further 13.5 thebe which is collected per every litre sold as the NPF levy. This amounts to approximately P16.2 million which is paid into the NPF every month without fail.
According to Moreri Moesi, Chief Public Relations Officer at the Ministry of Minerals, Green Technology and Energy Resources, the NPF had accumulated P268 million as at April 2020. His superior, the PS Masire, stated however that the figure will rise because fuel companies are yet to remit over-recoveries and the NPF levy collections made in the month of May.
He said monthly, the NPF either collects money or pays out some money, depending on the oil price over-recoveries and under-recoveries. Masire explained that global oil prices have been declining and that the decision to reduce fuel prices significantly in Botswana was in line with the global oil price performance. “The decision will allow fuel consumers to recover from the previous high prices especially during the lockdown which drained people and companies financially,” he stated.
By having consumers pay less at the pump, Masire said the economy shall benefit because operational costs of companies shall decline as a result of cheaper fuel prices. According to him, it means that while consumers will personally save money, so will manufacturers of basic products like food who will reduce costs of their products to the benefit of the consumer.
According to a Motswedi Securities research published on Friday last week, the commodity tracked a weekly loss of around 8 percent. The brokerage firm said one of the causes of the slump for the week was dampened demand sentiment stemming from an increase of new global COVID-19 cases, this being the first increase in new infections following a five-week decline of new cases.
“The idea here (is) that demand will willow as consumers opt to restrict their movements and consequently not spend on oil and oil products. Also playing a hand in the weakening of oil prices in the week was the unexpected increase in US crude inventories in the prior week, as reported by the Energy Information Administration (EIA). Inventories were supposedly at an all-time high of 538.1million barrels,” Motswedi said.