The Nigerian Midstream and Downstream Petroleum Regulatory Authority has attributed fluctuations in the pump price of petrol to a combination of factors, including the cost of crude oil supplied to domestic refineries, transportation and logistics expenses, taxes and the current structure of the country’s refining industry.
The Authority’s Head of Public Affairs, George Ene-Ita, explained that petrol pricing had been fully deregulated, meaning that changes in supply costs and prevailing market conditions could be reflected in the price consumers pay at filling stations.
Ene-Ita spoke in Abuja on Sunday while explaining the factors behind the continued movement in petrol prices, describing the situation as complex because several stages of the supply chain contribute to the final cost of the product.
“This issue is knotty in the sense that there are various factors involved.
“Pump price of petrol has been completely deregulated. And if this is the case, it also means that all volatilities associated with supply have to be factored in.
“These factors include single-source domestic refining, sourcing of crude oil as feedstock, time lag between when crude is sourced offshore and when it eventually arrives at the refinery.
“They also include time lag between when PMS cargoes are ordered and when they eventually arrive our ports for subsequent inland distribution and supply in the case of imported fuel.
“There are also transportation and landing costs, as well as marine and inland taxes.
“Perhaps when the domestic refining ecosystem becomes more robust, competitive and sustainable, the issues regarding pricing will become clearer and more beneficial to consumers,” he said.
The explanation comes amid renewed concerns among motorists and other consumers over rising petrol prices and the effect of higher transportation costs on household budgets and businesses.
Under the deregulated pricing regime, the cost of petrol is influenced by the prevailing economics of crude supply, refining, importation, transportation and distribution. Consequently, movements in international crude prices, together with domestic supply conditions and associated logistics costs, can affect the amount ultimately paid at filling stations.
Ene-Ita further clarified that the NMDPRA does not regulate refinery pricing templates or ex-depot prices under the current market structure.
He said, however, that the Authority was working with relevant stakeholders and government agencies, including the Federal Competition and Consumer Protection Commission, to promote price equilibrium and ensure that market conditions do not result in unjustified disparities at the point of final sale.
The latest development comes as international crude prices remain elevated, with Brent crude trading at $96.28 per barrel amid geopolitical tensions and conflict in the Middle East.
In the Federal Capital Territory, petrol currently sells for between N1,299 and N1,350 per litre, following an increase in the gantry, or ex-depot, price of the product by the Dangote Refinery to between N1,265 and N1,290 per litre.
The continued increase in petrol prices has intensified concerns over the broader cost-of-living crisis, with motorists and households facing higher transportation expenses and businesses having to contend with increased operating costs.
The Independent Petroleum Marketers Association of Nigeria has consequently called for government intervention in the pricing of crude oil supplied to domestic refineries, arguing that such a measure could help moderate petrol prices without necessarily reintroducing fuel subsidy.
IPMAN President, Maigandi Garima, said fluctuations in the international crude oil market were creating difficulties for domestic refiners because they were required to purchase crude at prevailing market prices.
According to Garima, higher crude prices increase the cost incurred by refiners, which eventually feeds into the price of refined petroleum products sold to consumers.
He urged the Federal Government to consider reducing the cost of crude supplied to domestic refineries whenever international crude prices rise sharply, arguing that this would help lower production costs and ease pressure on consumers.
“What we are saying is that if Nigerians can make this huge investment, we should support them. Government can intervene by reducing the cost of crude oil to the refinery.
“When the refinery refines the product at a lower cost, it can also reduce the price for Nigerians, and this will help the economy,” he said.
Garima also advocated a more predictable pricing mechanism for crude supplied to domestic refineries, noting that frequent changes in crude prices make it difficult for refiners to plan their operations and maintain stable prices for petroleum products.
He called on the Federal Government and other stakeholders to develop mechanisms capable of ensuring more consistent crude supply and pricing for domestic refineries.
According to him, greater stability in the crude supply arrangement would allow local refiners to plan their operations more effectively while creating room for more predictable pricing of petrol and other refined petroleum products.
The contrasting positions highlight the pressure created by the deregulated downstream petroleum market, with the NMDPRA emphasising the range of market-driven costs embedded in petrol pricing, while oil marketers are seeking measures that would reduce the cost of crude available to domestic refiners and ultimately moderate pump prices.
COURTESY: thepointng.com
