Subscribe: Gist E-Paper
Despite a sharp decline in global crude oil prices to levels recorded before the recent US-Iran conflict, petrol prices in Nigeria have remained above N1,000 per litre in many parts of the country, raising concerns among consumers and businesses over the slow impact of international market trends on local fuel costs.
Brent crude, the global benchmark for oil prices, dropped to $73.14 per barrel on Wednesday, while the US benchmark, West Texas Intermediate (WTI), fell to $69.85 per barrel, reflecting easing tensions in the Middle East following a peace agreement between the United States and Iran.
The decline comes after weeks of volatility triggered by hostilities involving the US, Iran and Israel, which heightened fears of disruptions to global oil supplies and pushed crude prices higher.
Before the conflict, petrol sold for between N770 and N800 per litre in Nigeria. During the period of heightened tensions, pump prices surged significantly, with a litre of Premium Motor Spirit (PMS) now selling for between N1,200 and N1,300 in several locations across the country.
Although crude prices have steadily retreated since the ceasefire agreement, petrol prices have only seen a modest reduction of about N75 per litre.
The situation has fuelled expectations that marketers should begin adjusting pump prices downward in line with falling international oil prices.
Industry analysts, however, say the relationship between crude oil prices and petrol costs in Nigeria is no longer straightforward under the deregulated market regime.
A petroleum marketer who spoke on condition of anonymity argued that current ex-depot prices should be significantly lower than existing levels.
According to the marketer, the ex-depot price ought not to exceed N700 per litre, compared to the prevailing rate of about N1,180 per litre.
Oil and gas analyst, Dr. Ayodele Oni, explained that declining crude prices alone may not automatically result in lower petrol prices for consumers.
He noted that exchange rate movements now play a critical role in determining the landing cost of imported fuel, as petroleum products are priced in dollars.
Oni said while lower crude prices create room for potential reductions in fuel costs, the extent of any relief at the pump will largely depend on the stability of the naira.
He added that sustained improvements in both crude oil prices and foreign exchange conditions would be necessary before consumers experience significant reductions in transportation and food costs, which are heavily influenced by fuel prices.
Market observers say if crude prices continue to trend downward and the naira remains relatively stable, pressure is likely to increase on fuel marketers to review pump prices in the coming weeks.
