Global crude oil prices have climbed to $107 per barrel, putting fresh pressure on petrol prices in Nigeria.
Industry operators say the surge, combined with exchange rate fluctuations, will raise landing costs and may force another upward review of pump prices in the coming weeks.
At this rate, analysts estimate that the petrol pump price could rise to N1,500/litre, from the present N1, 310, a development, they say, will further worsen the hardship resulting in possible death of those living below poverty level.
“Nigerians should prepare again for another round of hardship, high transport fares, food prices, cost of living. This is despite the much hyped $54bn reserves but it’s based on weak purchasing power,” says a concerned Nigerian
“At $107 + FX + freight + charges = higher pump price. No subsidy = prices follow market. So our suffering continues,” says an analyst.
Businesses that are struggling to survive, ocassioned by the rising cost of energy for their production, will further experience hardship and possibly, closure of some, as it was learnt that cost of energy could be going more than half of production costs.
With dwindling purchasing power ocassioned by inflation and relative depreciating value of the local currency, consumers, particularly the middle class, who have assumed the lower class positioning may become more vulnerable to diseases and death.
Specifically, the latest rally has increased pressure on domestic petrol prices, which have already climbed from about N830 per litre before the Middle East crisis to N1,310 or more in some locations.
Before the crisis began on February 28, crude oil traded below $69 per barrel.
However, the subsequent disruption to global oil supplies has pushed international prices sharply higher, prompting the Dangote Petroleum Refinery and fuel importers to adjust their pricing.
With Brent crude now above $107 per barrel and the US-Iran conflict continuing to disrupt tanker movements through the Strait of Hormuz, marketers and analysts warned that another petrol price increase could be imminent.
According to Oilprice.com, Brent crude surged to $107 per barrel on Thursday as the prolonged military confrontation between the United States and Iran continued to disrupt oil supplies through the Strait of Hormuz, raising concerns over a sustained reduction in global crude availability.
The international benchmark gained more than five per cent in early trading, extending the rally that pushed it above the $100 mark earlier in the week.
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West Texas Intermediate also climbed above $100 per barrel, reflecting growing global concerns that the conflict may continue to constrain crude supplies.
The latest increase was driven largely by a sharp decline in oil flows through the Strait of Hormuz. Oilprice.com reported that volumes, which had recovered to between six million and nine million barrels per day in previous weeks, had fallen sharply, with recent estimates putting daily outflows below two million barrels.
Shipping trackers also reported that not very large crude carriers had exited the strait since early September, a significant decline from the higher tanker traffic recorded during the brief period of relative calm.
The escalation of attacks on tankers and commercial vessels in the Persian Gulf and surrounding waters has further heightened uncertainty in the oil market.
Iran claimed to have struck several ships, while the United States confirmed the destruction of some Iranian oil tankers. Officials from both sides have given no indication of an imminent ceasefire, with their statements suggesting that the confrontation could continue for weeks or longer.
Analysts said the absence of a clear path towards de-escalation had forced traders to reassess global supply risks.
With oil flows sharply reduced and no clear diplomatic resolution in sight, global markets are increasingly pricing in the possibility of prolonged disruption to one of the world’s most important energy transit routes.
However, sustained increases in international crude prices in Nigwria and lack of enough vrude for local refiners, like the Dangote Refinery, could continue to feed into the domestic petrol market, with the possibility of refiners and importers adjusting their prices to reflect changes in global crude and related supply costs.
Metrobusinessnews.com had earlier reported that Nigeria’s Dangote refinery bought at least 16 million barrels of Nigerian crude for October arrival, as Africa’s largest refinery ramps up processing.
According to Reuters, Dangote’s 16 million barrel was made up of monthly allocations from Nigerian National Petroleum Company and volumes bought in a tender, equal around 520,000 barrels per day. That accounts for most of the 700,000-bpd refinery’s monthly intake.
Dangote has bought many different grades of crude from outside Nigeria, including from Libya and Guyana, developments that continue to lead to upwards adjustments of the pump price, since the purchases are done on the international market prices