The Nation Newspaper

Tag: pump price

  • Economics of oil pump price

    Economics of oil pump price

    The new oil pump regime announced by the federal government has raised fresh debate about the propriety or otherwise of the oil price template, reports Ibrahim Apekhade Yusuf

    Nigerians now buy premium motor spirit (PMS) at N86.50, thanks to the Petroleum Products Pricing Regulatory Agency (PPPRA), which approved new pump prices of petrol starting from January 1 to March 31, 2016 under a revised pricing template.

    Under the new pricing template, the government approved two pump prices – one for the retail outlets of the Nigerian National Petroleum Corporation (NNPC), which will sell at N86 a litre, and another for retail outlets operated by private business concerns in the downstream petroleum sector, which will dispense at N86.50 a litre.

    The Executive Secretary of the PPPRA, Farouk Ahmed, disclosed this to journalists in Abuja. He said NNPC was expected to sell petrol at N86 per litre to customers at its retail outlets, while other operators would sell at N86.50k per litre.

    He said both open market prices reflect a drop of N1 and 50k respectively from the current official price of N87 per litre, which will no longer obtain after December 31.

    Ahmed added that the announcement followed the approval granted by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, for the implementation of the revised template.

    PPPRA boss said the approved for importation three million metric tonnes of petrol in the first quarter (Q1) of 2016, of which NNPC was granted 78 per cent of the total allocated volume for the period, while 22 per cent would be supplied by other oil marketing companies.

    According to Ahmed, the cost elements that were affected by the review of its pricing template for petrol included the traders’ margin which was revised downwards from N1.47 per litre to zero; lightering expenses, from N4.07/litre to N2.00/litre; charges by the Nigerian Ports Authority (NPA), from N0.77/litre to N0.36/litre; jetty throughput charges, from N0.80/litre to N0.40/litre; storage charge, from N3.00/litre to N1.50/litre; bridging fund, from N5.85/litre to N4.00/litre; and ex-depot price, from N77.66/litre to N77.00/litre.

    He stated that other elements such as the retailers’ margin were however revised upwards from N4.60/litre to N5.00/litre; transporters’ margin, from N2.99/litre to N3.05/litre; and dealers’ margin, from N1.75/litre to N1.95/litre.

    “Accordingly, the ex-depot price of petrol shall be N77.00k per litre, while the pump price shall be N86.50k per litre in line with the prevailing market trend.

    “The key thing here is that with the revision, the open market price has come down slightly. The new pump price for private marketers is N86.50k, down from N87 per litre, effective January 1, 2016.

    “However, for NNPC imports, because an element of the template which is the financing cost is not captured in the NNPC template, its imports are slightly lower, so NNPC’s price will be N86 per litre, meaning that if you go to NNPC retail stations, you should buy at N86 per litre and N86.50k in other stations,” Ahmed explained.

    Politics of oil price

    Oil pump price remains one hotly debated issue around here and the reason for this is not far to seek. This is simply because oil price determines the prices of every goods.

    A cursory look at pump price by past administrations show that successive regimes have had to tinker with the oil pump price, most time basing their reasons on the vagaries of the market.

    Under Gowon, in 1973, he raised pump price from 6k to 8.45k (40.8%). His successor, Murtala increased it from 1976 raised to 8.45k to 9k (0.59%).

    Under Obasanjo, in 1978, it was raised to 9k to 15.3k (70%), while Shagari, April 20, 1982 shot it from 15.3k to 20k (30.71%).

    However, it was under the Babangida administration that the oil pump price witnessed an upward spiral. In March 31 1986, it went up from 20k to 39.5k. Two years later,  it rose to 39.5k to 42k, just as it leaped from 42k to 60k in 1989.

    From December 19, 1989, it maintained a uniform price of 60k for two years but rose astronomically to 70k in 1991.

    Under the interim government of led by Shonekan, in 1993, it moved from 70k to N5.

    Under the Abacha military junta, the petrol price dropped from N5 to N3.25k in 1993 and later rose to N15 in 1994. In 1994, the price dropped again from N15 to N11.

    During the transition government of Abubakar, December, 20, 1998, it rose from N11 to N25 and later dropped to N20.

    In what appeared to be a new vista in oil pricing, under Obasanjo, June 1, 2000, it moved from N20 to N30, and subsequently reduced to N22 and N26 both in 2002.

    In 2003, it again rose from N26 to N42, and marginally increased to N50 in 2004 and N65 in the same year, N75 in 2007.

    Under the late Yar’Adua, it reduced to N65, but rose astronomically under Jonathan, in January 1, 2012, who raised it to a record N138.

    Until the Buhari administration announced the new pump price of N86.50 last week, the lingering fuel crisis experienced across the country had led to discriminating pricing.

    Reactions to new pump price

    But with Nigeria’s oil receipts expected to reduce substantially as crude oil prices may slump to as low as $20 per barrel in 2016, going by the International Monetary Fund (IMF) projection, it remains to be seen what magic the government will perform considering the fact that the benchmark for the budget is based on $38 per barrel.

    Thus the question on many lips is whether the proposed price for PMS is feasible, given that government is yet to clearly take a stand on the issue of subsidy, which will advertently affect the pump price of the product.

    In the view of Dr. Austin Nweze, a political economist and public affairs commentator from the Pan Atlantic University of the Lagos Business School, the new N86 for PMS is not something to cheer about because the pump price ought to be lower than what is being offered by the government.

    “The thing is that since the international oil price is down, we’re supposed to have lower prices for petrol here. Since they are buying oil cheaper now, the citizens are supposed to be discounted. That was why under the last administration, they brought down the price of the pump price too when it became obvious that the global oil was falling. So actually, the price should be lower than what the government is offering in the first place.

    “But the fundamentals should be taken care of. As l said, since the international oil price is going down, the pump price should be about N60-N50 because l’m not sure the cost of refining has gone up yet. The raw crude is still cheaper.”

    While acknowledging that the price of oil at the international market will continue to fluctuate and as such will affect the price either positively or negatively, he said it would help if the government make frantic efforts to get the local refineries fully functional to enable the country reap the benefits.

  • Petrol stations shun pump price directive

    Most Lagos filling stations have yet to sell petrol at N87 per litre, more than one week after marketers  returned to lifting products.

    A News Agency of Nigeria (NAN) investigation showed that most stations are exploiting consumers, despite the Department of Petroleum Resources (DPR) warning against such acts.

    The stations were selling petrol at between N100 and N150 per litre despite displaying N87 per litre on their dispensing pumps.

    Attendants use calculators to determine the price.

    While some motorists declined to buy, those who bought, accused the stations of sabotaging the government’s efforts to make fuel affordable and available.

    Mr Segun Aribisala urged the DPR to ensure erring stations complied.

    “Some filling stations in Ikorodu are capitalising on the location of the town on the outskirts of Lagos to sell at unofficial prices.

    “During the National Union of Petroleum and Natural Gas Workers (NUPENG) strike, some of these petrol stations sold fuel as high as N400 per litre, exploiting motorists and residents who had no alternative.

    “Now that the strike is over and with directive to revert to the N87 pump price, they have remained adamant,” Aribisala said.

    Mr Fatai Ajetunmobi, a commercial bus driver, said: “The petrol scarcity has eased off as many petrol stations now have stock and are selling it.

    “That is the reason why we have long queues at those stations that are complying with the official N87 pump price.”

    He blamed the hike in transport fares on the inflated petrol price.

    NAN reports that stations owned by the independent marketers and some major marketers, are also involved in the sharp practice.

    An attendant at a station at Kasolori, on the Ikorodu-Ijebu Ode road, told NAN that they were selling at N125 per litre based on management’s instructions.

    “There is still scarcity of petrol and the product we have is old stock. Maybe the management might revert to the N87 pump price by next week, when fuel would have circulated fully,” he said.

    In a statement by its Head, Public Affairs, Mrs Dorothy Bassey, DPR on May 25 warned operators against selling petrol above the official pump price of N87 per litre.

    “While the DPR is making every effort to ensure that fuel is available and reaches every part of the nation, it is hereby emphasised that the Federal Government has not increased the price of fuel.

    “The price remains at N87. Any station caught selling above the stipulated price, will have its licence revoked.

    “No station should sell in jerry cans as there is enough fuel and for safety reasons. Any station caught dispensing into jerry cans will be sealed off  .

    “We ask the public to exercise caution and cooperate with all guidelines and processes, for the safety of all,” the statement said.

     

  • Motorists lament increase in petroleum pump price

    Commercial motorists operating in Aba, Abia State, have decried the sudden increase in the pump price of Petroleum Motor Spirit (PMS), which has generated panic buying of the product, following an anticipated pump price increase.

    The Federal Government reduced the pump price of PMS from N97 to N87 per litre as a result of the recent crude oil price fall in the global oil market.

    However, in less than a month after Federal Government’s announcement, people are buying the product at N100 against the official N87 pump price.

    A visit to some of the filling stations in Aba indicated that the majority of the Independent Petroleum Marketers were selling at N100 per litre with less or no queue of vehicles in their stations.

    Some motorists, who spoke to our correspondent, blamed the marketers for the scarcity, alleging that they created artificial scarcity by hoarding the product.

    They, however, said the sharp increase had not  affected the price of transport fare, stressing that the possibility of transport hike could not be ruled out if the situation was not controlled by appropriate quarters.

    “For now, the price of transportation has not increased. But in a situation where the product continues to sell at N100 for a long time, we cannot rule out a little increase in transport fare to cover our expenses”, a respondent said.

    Absolving marketers from the blame of hoarding PMS, an executive member of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Osisioma Depot, who spoke on condition of anonymity, said no private depot had PMS, adding that petroleum products had not been supplied to the Aba depot in the last three months.

    The source said to alleviate the sufferings of motorists and other petroleum users in Aba and its environs, members of the association resolved to source for the product in different parts of the country, stating that they were expecting that “the people that went for the first quarter importation of the product would have received the product” to address the situation.

  • No reduction in fuel pump price, says PPPRA

    No reduction in fuel pump price, says PPPRA

    The Petroleum Products Pricing Regulatory Agency (PPPRA) has said it will not reduce the pump price of premium motor spirit (PMS) or petrol from the fixed price of N97 per litre because it still subsidises the product.

    This is despite the crash in the price of crude oil in the international market to about $43 from over $100 a barrel.

    A source in the agency said   the pricing template to determine the pump price had not changed, and because national fuel consumption is still dependent on importation, the falling oil price doesn’t  affect local operation.

    The source said as at last week, the government subsidised PMS by N5 per litre, noting that the expected Open Market Price (OMP), which includes landing costs and distribution margins, was N104 per litre reflecting subsidy of N7 per litre.

    The distribution margins include the fixed overhead and other running costs from the landing of the product to the point of sale to consumers (retail outlets). This component of the pricing template took effect from February 2009. The distribution margins include retailers (N4.60 per litre), transporters margins (N2.99 per litre), dealers margin (N1.75 per litre), bridging fund (plus marine transport average) (N6.00 per litre) and administrative charge (N0.15 per litre), bringing the total to N15.49 per litre. This is added to the landing cost, which gives the expected open market price.

    When The Nation visited the PPPRA website for the daily product pricing template, the last posting was the activity of December 29 last year, which showed that the landing cost was N82.41 with distribution margins of N15.49 giving a total of N97.90. Therefore, when the retail price of N97 is subtracted from the expected open market price of N97.90, it showed that the government subsidised the product with only 90 kobo for the day. This indicated that subsidy this month increased over that of December.

    From 2010 till mid-last year, world oil prices had been fairly stable at about $110 a barrel but have fallen sharply over the past seven months to below $50 a barrel as at last week. The development has led to significant revenue shortfalls in many oil exporting countries including Nigeria.