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Fuel prices decrease minimal despite collapsing global oil prices

Kabelo Adamson

Motorists were left disappointed this week after the eagerly anticipated drop in fuel prices turned out to be a 13 thebe per litre decrease for petrol and 10 thebe for diesel.

The minimal adjustment means a litre of petrol in Botswana is now P9.30 whilst diesel trades at P9.40 to the litre.

Retail prices for illuminating paraffin on the other hand decreased by 20 thebe per litre.

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Announcing the reduction on Monday, Botswana Energy Regulatory Authority (BERA) Chief Executive Officer, Rose Seretse stressed the new amount was influenced by the general decline in international oil prices.

The slight alterations comes three weeks after President Mokgweetsi Masisi first told the nation fuel prices were set to go down.

In his address to the media on Tuesday, Minister of Mineral Resources, Green Technology and Energy Security, Lefoko Maxwell Moagi explained that when government decide on fuel prices, they consider global oil prices as well as the costs at which fuel is brought into the country.

“After that, we look at where the National Petroleum Fund (NPF) stands because this Fund cushions consumers against adjustments. We do this because in the absence of the NPF, it would mean every time prices move either way it means the costs at source change,” outlined Moagi, adding that when a consumer buys fuel, 13.5 thebe from every litre goes into the Fund.

He explained constantly adjusting the price of petrol would hit end-users hard as fuel prices affect costs of other services and products through inflation.

“Moreover, our fuel prices have been stagnant for a long period of time and inflation has over the past three years reached 9.3 percent overall. If you take a look at countries which we do business with and where we source our fuel, they are adjusting their prices and you will find that ours have been overtaken by time,” continued Moagi.

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While consumers had been hoping for a more substantial reduction, the Minister stressed fuel prices would be reviewed every three months with a view of keeping in line with both global and regional oil prices.

“This will help us as users of fuel as well as those we buy from. At the moment it helps in the sense that food is important during this period, so it is important to help those in the agricultural sector.”

Moagi said currently the country has enough stockpile to assist with 15-days cover of stock.

Meanwhile, pressure on international oil prices continued this week as crude oil prices collapsed to historic new lows.

Investment Analyst at Kgori Capital, Kwabena Antwi predicted that the decrease in oil prices would keep inflation low and likely lead to a further drop in local pump prices.

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With transport accounting for 23 percent of the inflation basket, he said this means low or disinflationary pressure within this component will keep overall inflation muted.

“The situation warrants close monitoring for the next few weeks and even months in the context of the changing global environment brought on by the Covid-19 pandemic,” he pointed out.

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