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There appears to be no respite yet for Nigerians who may have expected that with the coming on board of the Dangote refinery into the petroleum space in Nigeria, everyone would soon heave a sigh of relief that the price of fuel would drop considerably.
Dismantling this expectation as unrealistic, the Managing Director and Chief Executive Officer of Pinnacle Oil and Gas, Mr. Robert Dickerman, averred that it will amount to sheer pretense to believe that “Dangote production will cause massive price reductions in Nigeria”. What has been possibly overlooked by many people, is a lack of understanding of the dynamics involved in petroleum pricing. “Certain indices must be factored in, when talking about how fuel prices are arrived at the retail end of the market” he explained.
Mr. Dickerman was speaking as the Lead presenter at the Association of Energy Correspondents of Nigeria (NAEC)’s, annual strategic international conference, 2024, held recently at Eko Hotel and Suites, Lagos.
Giving a vast insider knowledge of the oil and gas industry, Mr. Dickerman explained, “all crude oil and petroleum products are priced in USD, all over the world. “When we import products, whether the buyer is NTL or a private marketer, we must pay the global market price, adjusted for quality and location. That price is in dollars.
When it is resold in Naira by vessel, in bulk in a terminal, by truck at a gantry, or by pump at retail, the market price is the USD price converted to naira at the current FX exchange rate …” Speaking further, Dickerman re-stated that “any underlying assumption that Dangote should sell below market price is nonsensical. Dangote refinery and petrochemical is a private business … so if you own a business that can sell a product at X one day to one customer, why would you sell it at a lower price to another customer. The only sensible strategy for Dangote is optimization, as it would be for any investor and operator”.
The oil and gas industry expert, reiterated “ now that we all know the global market price for any
“all crude oil and petroleum products are priced in USD, all over the world. “When we import products, whether the buyer is NTL or a private marketer, we must pay the global market price, adjusted for quality and location. That price is in dollars”
commodity is dollar-based, and must be converted to Naira at the Naira/ USD exchange rate, we also know that the large majority of price increases we have seen in the past year are not because of government policy, price gouging or product hoarding, nor are they due to an increase in the price of crude oil. They are due to the fall in value of the naira. Every drop in the naira raises the cost of anything imported or market priced, whether it is gasoline or manufactured goods or food.
In proffering a solution, Mr. Dickerman submitted that “we must address the root problem, which is how to restore global confidence in Nigeria’s economy and currency, create foreign investment in jobs and local production, increase tax revenue and achieve fiscal prudency! That is the only way to reduce petroleum products prices in Naira”.
By our reporter.
