Sunday, May 29, 2022

Fuel Prices Surge: BERA on ‘Wait and See’ mode

As the world grapples with the Russia-Ukraine crisis, Botswana Energy Regulatory Authority (BERA) is applying a ‘wait and see’ approach before making decisions on the impact of rising crude oil and fuel costs globally on Botswana.

BERA Chief Executive Officer Rose Seretse says the energy regulator is aware of changes in global fuel as well as oil prices and explains how they keep track of fuel and oil prices regionally and internationally.

“BERA is aware of the situation and continues to monitor the price fluctuations. If there is a need for price adjustment the Authority will make a recommendation to the minister as per the BERA Act. Local prices are computed based on a number of international, regional and local cost components. We use the price of refined petroleum products instead of crude oil for purposes of our calculations.”

Seretse further says besides refined products prices (often referred to as Free-on-Board prices), other elements considered include amongst others; freight costs, storage and handling costs, exchange rates, and duties and levies. Therefore, local prices are derived from analyzing a whole lot of factors, and not only international oil prices.

The Energy Regulator last introduced a fuel and oil price increase in December 2021, with retail pump price of fuel averaging P1.65 thebe/litre and diesel increased by P1.75 thebe/litre. The Authority explained at the time that the need to increase was due to the need for regular price adjustment to manage unit rates and the cumulative debt to oil companies.

Fast forward to March 2022, and on how the current situation on global fuel increase can trickle down to Botswana, Seretse says any recommendations will be based on what they learn from monthly reviews.

“Fuel price adjustments are based on monthly reviews. We are guided by movement of international prices. It should be noted that as a Regulator we only make recommendations to the Minister on price changes as per the BERA Act.”

When giving an overview of the National Petroleum Fund and the fuel levy, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi said “the adjustment of local pump prices is a continuous process even beyond 2024 because the prices are determined by market forces in particular movement in international oil prices and the extent of price stabilization is limited by the funds of the National Petroleum Fund(NPF).”

The fuel levy is under the Ministry of Green Technology, it is administered by the Ministry of Finance and Economic Development through Botswana Unified Revenue Services (BURS).

According to the Minister Botswana consumes about P12 billion per year of fuel and Government benefits from fuel levy contribution to its fiscals. In terms of the state of NPF, as at 31st January 2022 the balance of the fund stood over P198 million and in terms of levy collections, remittance of the NPF continued to be made by local oil companies importing and supplying petroleum products.

The Minister revealed that during the third quarter of financial year 21/22 the NPF levy collections stood over P340 million and some local companies also made some remittances into the fund during the same financial in the order of P80 million in lieu of the cumulative state of recoveries for the period August 2019 to March 2021. For the third quarter of financial year 21/22, the NPF paid a total of over P580 million to oil companies.

Minister Moagi said “regrettably some oil companies do not pay all the levies as expected hence they offer lower prices. This omission is a cause for concern and Government is looking into this to ensure levy collection is effective and efficient to close the loop hole.”

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