As consumers fill up their tanks, there’s growing concern over the looming possibility of petrol prices surging above N700 per litre in the near future. The reasons behind this impending increase are multi-faceted, stemming from a combination of factors that are sending shockwaves through the global oil market.
One significant contributor to the potential price hike is the drastic reduction in oil production by Saudi Arabia and other major oil-producing nations. These production cuts come at a time when geopolitical tensions, including the ongoing Russian invasion of Ukraine, have already sent shockwaves through the oil market. The result? A staggering tripling of crude oil costs over a mere eight-week period.
Saudi Arabia, the world’s second-largest oil producer, has been playing a pivotal role in shaping the trajectory of oil prices. By successfully reducing crude oil production and announcing further cuts, the nation aims to align with its ambitious Vision 2030 plan. This plan seeks to diversify Saudi Arabia’s economy, moving away from its traditional dependence on oil and creating new job opportunities.
To reinforce their objectives, Saudi Arabia has also made the strategic decision to decrease oil exports by a million barrels daily. These calculated moves are aimed at supporting higher oil prices, which in turn can bolster the nation’s economic transformation.
The ripple effects of these global events have been felt domestically in Nigeria as well. Challenges in the country’s fuel industry, coupled with delays in refinery projects and non-functional local refineries, have added to the complexity of the situation. However, there is a glimmer of hope on the horizon as President Tinubu has announced the projected commencement of production at the Port Harcourt refinery by December 2023.
Since the removal of petrol subsidies in May 2023, Nigeria’s petrol consumption has seen a noticeable decline. This decline coincides with a significant increase in monthly imports in West Africa, which jumped by a remarkable 56% in the second quarter of 2023. Daily petrol consumption has also dipped, standing at 46.38 million litres per month, down from the pre-subsidy removal figure of 65 million litres.
Market forces are playing a pivotal role in the increasing costs at petrol stations, a clear indication of the effects of deregulation. Mele Kyari, Group CEO of the Nigerian National Petroleum Company Limited (NNPCL), has pointed out that these market dynamics could lead to further fluctuations in petrol prices. The NNPCL’s oil swap deal, aimed at optimizing revenue, has faced its share of challenges, resulting in revenue losses, foreign costs, and escalated debts.
Despite these challenges, industry experts anticipate a potential silver lining: a potential reduction in petrol prices by N70 per litre once local refining operations reach full capacity. This projection is rooted in the anticipated benefits of the Nigerian government’s investment in functional refineries. Mike Osatuyi, National Controller of Operations for the Independent Petroleum Marketers Association of Nigeria (IPMAN), expresses optimism that the completion of refinery refurbishments will significantly alleviate the pressure of imports and ultimately lead to more affordable fuel prices for consumers.
Finally, the spectre of petrol prices reaching N700 per litre reflects the complex interplay of global oil dynamics, production cuts, and domestic hurdles. As consumers prepare for potential price hikes, the prospects of market fluctuations and the promise of functional refineries will undoubtedly continue to shape the future trajectory of fuel costs in Nigeria.
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