PETROL PRICING: THE MYTH, THE PUBLIC PASSION & THE FACTS.
#THREAD
#EnoughIsEnough #MrPresident #Buhari #Nigerians #IFB
#THREAD
#EnoughIsEnough #MrPresident #Buhari #Nigerians #IFB
Petroleum pricing is a sensitive issue in Nigeria because the various past governments got it all wrong abinitio, and this has been because of the wrongly perceived and sustained notion that 'we are a rich nation'.
In truth, no government has any business selling or retailing petrol, diesel and kerosene to its citizens.
All over the years, except perhaps President Yaradua's administration, every government has had to go through the unpleasant experience of increasing fuel prices with its attendant civil resistance.
The worst perhaps was that of the President Jonathan's era which nearly toppled that government.
This administration has been particularly fortunate in the subdued disposition of the populace towards past increases in prices of petrol in particular.
However, the recently announced new price increase to over N151 per liter depot price seems to be causing a furore.
However, the recently announced new price increase to over N151 per liter depot price seems to be causing a furore.
The big question, besides politics, we should be asking is "what is the real problem"?
Why must government after government always make desperate efforts to increase fuel prices in the life of their administration?
Why must government after government always make desperate efforts to increase fuel prices in the life of their administration?
The answer is not simple because more often global issues completely outside the control of our governments affect fuel prices. But more pertinent to our own component of the obvious global complexities is the perennial instability of our exchange rate...
...which appears to be on negative decline almost in perpetuity.
Presently the international market price for gasoline is about $2.6 per gallon (4.5L). That translates to approximately N219 per litre cost without frieght, duty, petroleum tax, etc.
Presently the international market price for gasoline is about $2.6 per gallon (4.5L). That translates to approximately N219 per litre cost without frieght, duty, petroleum tax, etc.
Therefore any fuel pump price less than N230 per litre is a subsidized price. - UNARGUABLE FACT.
Below are gasoline prices/litre, today in some selected countries in the world including Saudi Arabia; world's largest oil producer.
Below are gasoline prices/litre, today in some selected countries in the world including Saudi Arabia; world's largest oil producer.
So what do we do as a country?
Nobody will suggest the adoption of the Venezuelan Model (almost an irresponsible and unsustainable Subsidy Regime) which has completely decimated their economy to the chagrin of their citizens.
Nobody will suggest the adoption of the Venezuelan Model (almost an irresponsible and unsustainable Subsidy Regime) which has completely decimated their economy to the chagrin of their citizens.
We can throw petroleum pricing to market forces entirely. In which case government takes off its hands from import, distribution & sales of petroleum products as it is done majorly all over the world or we continue with this partial & obscure, corruption laden subsidy regime.
A median approach is for government to approach the 7 oil majors operating in Nigeria & sign a transparent Oil Swap deal.
Oil swap is not new in Nigeria, but when it was done, it was full of shady practices using briefcase companies to transact this all important business.
Oil swap is not new in Nigeria, but when it was done, it was full of shady practices using briefcase companies to transact this all important business.
This experience does not invalidate the suitability of this model.
The 450,000 barrels allocated daily for domestic consumption can be given to the oil majors at an agreed, generous, but well calculated rates.
The 450,000 barrels allocated daily for domestic consumption can be given to the oil majors at an agreed, generous, but well calculated rates.
They will return the gasoline and diesel components to us at special negotiated prices below the international market prices.
If properly and patriotically worked out, it is possible to get gasoline in at about $1.5 per gallon or between N120 to N130 per litre.
If properly and patriotically worked out, it is possible to get gasoline in at about $1.5 per gallon or between N120 to N130 per litre.
1 barrel, 42 gallons of crude oil will give 44 gallons of products, including:
Gasoline(19.4), Jet fuel (4.4), fuel oil (0.9), Distilates (diesel, oil, etc; 12.5)
Others (lubricants, asphalt etc; 6)
Revenue from 1 barrel of crude will be in between $80 to $89 per barrel.
Gasoline(19.4), Jet fuel (4.4), fuel oil (0.9), Distilates (diesel, oil, etc; 12.5)
Others (lubricants, asphalt etc; 6)
Revenue from 1 barrel of crude will be in between $80 to $89 per barrel.
Cost of refining is about $2.5 to $2.7 per barrel.
Official selling price of crude is about $45 per barrel.
Official selling price of crude is about $45 per barrel.
Depending on how much discount we can give on this price, things can be worked out in such a way that the oil majors still make a decent profit and Nigerians can still enjoy fairly cheap petroleum pricing.
I dare say, that this is not the time for riots and social disruptions which are ill winds that does no good to the struggling economy, or our shaky socioeconomic conditions.
Government need to be more open, caring and more engaging. This is the period of serious cerebration and ingenuity in government circles. It is also a period of deep and broad based understanding and realistic appraisal by the stakeholders and members of the public.
Right now we cannot afford mob actions or unreasonable societal disruptions.
God bless the Federal Republic of Nigeria.
God bless the Federal Republic of Nigeria.
