Petrol price reflection of current economic realities – Oil marketers

Amid the increase in petrol pump price, the Major Oil Marketers Association of Nigeria (MOMAN) has said the international price of crude oil and exchange rate constitute largest the components of cost build-up for the commodity, accounting for over 80 percent.

The remaining 20 percent, it noted, includes statutory dues, distribution costs, and margins.

MOMAN, while reiterating its support for the deregulation, said the policy promises a transparent and level playing field where cost-reflective prices are evident at fuel stations.

In a statement issued at a virtual meeting of the Association by its Chairman, Mr. Olu Adeosun, the body noted that in a liberalised market, the pump price of petrol should accurately reflect the current economic realities.

“In recent months, the price of PMS has remained relatively stable. On 30 May 2023, Platts reported a price of $827 per metric ton (MT), and on 14 July 2023, it was $859.25 per MT. However, there has been a significant increase in foreign exchange rate. MOMAN can infer from its calculations in May that the Nigerian National Petroleum Company Limited (NNPCL) determined its pump price using an exchange rate of about N630 to the US Dollar, while banks reported an exchange rate of approximately N650 on the Investors and Exporters (I&E) window. As of today, the liquid exchange rate is close to N825 to the Dollar. This devaluation adds N100 to the cost of importing a single litre of PMS into the country. Consequently, an increase in the pump prices of petrol should be expected,” the MOMAN statement said.

Adeosun further noted that the association has always anticipated that the removal of subsidies and the stabilisation of downstream market would be a gradual process. This process, he explained, necessitates operators and regulators to engage the public transparently, earn public trust, and foster fair competition that ensures full value for customers at the fuel pumps.

Commending government its efforts in opening the market and allowing various players to import petroleum products into the country, the MOMAN boss noted that “this market liberalisation and the commitment to a level playing field should enhance operators’ efficiency, enabling them to offer competitive pricing choices to the public.”

While noting that some operators have successfully imported PMS into the country, marking the first practical step towards a liberalised market, the body however, said that major challenges still lie in accessing foreign exchange (FOREX) for imports and ensuring a level playing field regarding pump prices.

“If marketers are undertaking the financial risk of importing petrol, measures must be in place, in line with the Petroleum Industry Act (PIA), to ensure that no one player has an unfair advantage,” Adeosun warned.

MOMAN, in its statement, further noted that a crucial aspect of the deregulation success lies in key areas of effective and sustainable implementation of the gains from subsidy removal and focused and sustained increase in the country’s national production of crude oil from the current 1.2 million barrels per day to closer to two million barrels per day as this will bring the much-needed foreign exchange.

According to Adeosun, the reality is that the downstream deregulation has brought about structural changes and opportunities for Nigeria and petrol now stands as the most expensive product in the energy mix for consumers.

Therefore, to combat the current situation and minimise the financial impact, MOMAN, in its statement urged Nigerians to take advantage of the country’s large gas reserves and its abundance of solar resources and consider same to adjust their individual energy consumption mix, including households considering switching from petrol and diesel to gas or solar power for their homes, if they can afford it.

Additionally, it said the government and businesses can promote the use of Liquefied Petroleum Gas (LPG) and Compressed Natural Gas (CNG) for intercity buses, tricycles, minibuses and taxis to power their vehicles.

“In any event, the country will need to explore and deploy different energy options to develop a sustainable, affordable and long-term energy mix for powering homes businesses and mobility,” the MOMAN statement said.