Crude Oil Refinery Owners Association of Nigeria (CORAN) has said that the price of Premium Motor Spirit (petrol) can drop below N400 per litre with the current crash in crude oil prices.
CORAN argued that there is no reason petrol should not be sold at NN350 per litre if crude prices eventually fall to $50 per barrel.
However, CORAN said petrol prices will continue to rise despite the crash in crude prices and the reduction in its landing cost.
CORAN feared that unless the Federal Government continues the naira-for-crude deal, the price of petrol will be on the rise even if the price of crude oil falls to $50 per barrel.
Oil prices plunged last week to $65 per barrel as the United States import tariffs and an unexpected OPEC+ supply hike erased $10 per barrel from global benchmarks.
The price had appreciated earlier when US President Donald Trump imposed tariffs on any country that buys crude from Venezuela.
However, oil prices turned the corner as of Friday, with Brent falling to $65, the first time since 2021.
According to oilprice.com, the combined effect of Trump’s import tariffs, OPEC+’s inopportune decision to speed up the unwinding of production cuts, and China’s retaliatory actions wiped off $10 per barrel from global oil prices, “with ICE Brent falling below $65 per barrel for the first time since August 2021.”
The US West Texas Intermediate crude futures lost $4.96, or 7.4 per cent to end at $61.99.
China’s retaliatory tariffs on US goods were said to have escalated a trade war that has led investors to price in a higher probability of recession.
China, the world’s top oil importer, announced it will impose additional tariffs of 34 per cent on all US goods from April 10.
According to Reuters, nations around the world have readied retaliation after Trump raised tariffs to their highest in more than a century.
Aside from the tariffs, another factor that further pressured oil prices was the Organisation of the Petroleum Exporting Countries and Allies’ decision to advance plans for output increases.
The group now aims to return 411,000 barrels per day to the market in May, up from the previously planned 135,000 bpd.
In a bulletin released by the Major Energies Marketers Association of Nigeria, it was disclosed that the landing cost of petrol has dropped from N885 the week before to N865 as of Saturday.
However, despite the landing cost reduction, the ex-depot price of petrol rose from N860 to N900 per litre in Lagos, signalling the failure of the Nigerian market to react positively to the market forces.
In an interview with our correspondent, the Publicity Secretary of the CORAN, Eche Idoko, expressed worry that the price of crude in the international market is reducing but the price of refined fuel in Nigeria is shooting up before the naira has been falling due to pressure.
According to him, the naira-for-crude policy is purely targeted at ensuring energy security for the country and stabilising the strength of the naira.
Idoko lamented that some individuals are still hellbent on continuing a regime of importing substandard petroleum products into the country.
Idoko explained that some middlemen do not want local refining to succeed, and they have since resorted to kicking against the naira-for-crude deal.
According to him, the price of petrol was heading to N700 per litre before the naira-for-crude deal was discontinued.
“The price will continue to rise because these middlemen are the elements that want to see that local refining is not sustained. Because when we turned to local refining in this country, we saw the price of petroleum products dropping to as low as N700 plus. And it was going to go down more like we promised you guys. I granted an interview to you guys and said that if local refining is ramped up, the price of petroleum products is going to come down. I was even audacious enough to say that we could even see it drop to as low as N350. And it was heading towards that because if crude drops to $50, for instance, there’s no way that we won’t sell petrol at about N350.
“These are possibilities. Unfortunately, we have middlemen who pride themselves as agents. They have no scheme in the game other than that they have fixed prices because they don’t have risk. All they do is that they connect Nigerian consumers with international traders and then make their money and go away. So, they don’t have anything to lose. They have no investment in this business. They just come in as agents, make money, and then cash out,” he submitted.
Idoko said, “It is foolhardy for anybody to think that in their bid to continue a regime of importing substandard petroleum products, they will thwart the naira-for-crude policy.
“I know that the advisers of President Bola Tinubu, who, incidentally, is the Minister of Petroleum Resources, have been able to analyse where we were before the naira-for-crude policy; where we came to after the implementation of the policy; and where we are heading to after the pilot test of the naira-for-crude policy.
“I hope you know that as we speak, the price of crude in the international market is reducing; meanwhile, the price of refined food in Nigeria is shooting up. It is simply because of the FX effect. And we have simply said it is a no-brainer. Give crude in naira to local refineries so Nigerians can, at least, enjoy the benefit of being the largest oil-producing country in Africa,” he stated.
Asked to justify why the price of fuel is going up when crude oil has fallen to $65 per barrel globally, the CORAN spokesman blamed foreign exchange, logistics, and the effects of middlemen.
“The price will keep rising because of the FX and logistics effects. The cost of logistics, when you add it to the cost of FX, would make the price go up. And of course, because of the money involved when you have to also accommodate the middlemen who sell.
“You know when you want to rent a house, you need the agency fee. If you add the agency fee, the price goes up. That’s what happens. That’s why you can’t get it cheaper. You have the FX effects, and you have the effects of the logistics of shipping in refined petroleum products. And then, you also have the effect of the middlemen. All these will push the cost of petroleum products high in Nigeria,” he added.
Idoko noted that the refiners would not bother to join issues with elements who want to do propaganda or turn the naira-for-crude deal into political issues, saying the success of the policy is affecting a few selfish individuals’ incomes.
“We know why we invested and ventured into the midstream segment. But we know what these elements want. We know what their interest is. We just leave it to Nigerians to judge which is the best. And I think the government also would know what is best for it. One of the most brilliant policies they have implemented was the naira-for-crude. I hope they will sustain it. But if they don’t, I am sure they have better judgement,“he submitted.
The CORAN spokesman regretted that local refiners have to resort to foreign nations to source crude oil.
“Unfortunately, our major refiners have had to resort to other sources so that their investment would not shut down. For that reason, a lot of them have been talking to other producers to get crude so their refineries can run. And it speaks to the fact that a lot of elements, rather than see to the development of this country, are trying to play politics with something as important as energy security.
In October, the Nigerian National Petroleum Company Limited began the naira-for-crude deal with the Dangote refinery as part of an initiative to deflate Nigerian fuel prices.
However, the national oil companies delivered roughly 280,000 b/d of crude to Dangote in naira by March 10, falling shy of the 385,000 b/d agreed under the deal, S&P Global said.
As the six-month deal ended last month, there are growing concerns that the FG may not renew it, and this has caused a hike in fuel prices after the Dangote refinery announced the suspension of naira fuel sales.
The price of a litre of petrol now ranges between N920 and N970, depending on the location.
